Monday, October 5, 2009

A Nation of Spenders

Can the world economy count on China to open up its pockets as Americans are closing theirs?

From The Washington Post:

Image from mamondo.com

BEIJING -- Chen Zizheng wheeled his shopping cart down one of the aisles at the Carrefour store near his house and paused in front of the bottles of Remy Martin, Johnnie Walker and Hennessy, each selling for an amount about equal to the annual salary he earned when he was a young government employee.

But those days were about 30 years ago, around the time Deng Xiaoping launched China on a path of economic reform and opening up. Now China's thriving economy has made it possible for people like Chen, a 67-year-old semi-retired aerospace industry official, to plop down 1,168 yuan, or $170, for a bottle of liquor at a branch of a French "hypermarket" chain.

"It's not that expensive for ordinary Chinese people now," he said, adding that he planned to serve Johnnie Walker Green Label to guests he was expecting to share moon cakes with during last weekend's mid-autumn festival.

"As Chinese society has developed and opened up, people have a better appreciation of imported liquor," said Chen, who used to buy the traditional Chinese stiff drink known as maotai. "When you choose a gift, other people will look at it and if it is brand stuff they will feel respected because you chose it for them."

One year after the global economy went into a tailspin, many economists are wondering whether Chinese consumers, once a thrifty lot, will lead the world out of the recession. Last week, the International Monetary Fund said China would do just that, thanks in part to the government's $600 billion stimulus package and a flood of bank lending. The IMF increased its forecast of Chinese growth to 8.5 percent in 2009 while lowering its forecast for the U.S. economy, which it said would shrink 2.7 percent.

Read On
Chinese people, on the whole, are frugal. But their attitudes are changing. Especially when it comes to people living in cities who are getting rich.

Whether its Buicks or Louis Vuitton or Chivas Regal, Chinese people are quickly developing tastes for material goods. Any idea that China's history with communism took away the passion for these kinds of goods is dead wrong. China is a country full of new rich people. Just like in all countries in the world, people who have money for the first time in their lives like spending it.

I heard a lot of mockery about China's 60th anniversary on media reports this week in America. I suppose the mockery is deserved in a lot of ways. But westerners would be wise to look past this past week's homage to communism because it was just a big show.

China is becoming a blatantly materialist society and is more and more comfortable spending money. It'll take years. But I expect Chinese people to be making up for Americans' (much-needed) belt tightening before too long.

5 comments:

Hopfrog said...

Agreed. Brazil has already stated that China has just taken over America in a lot of their exports.

Chinese frugality is the stuff of legends, but I think as the Chinese start to truly feel empowered, their gonna relax those clenched fists and spend. Its already quite clear to me, especially after watching 'Win in China' that they have used America as a role model in a lot of ways and I expect our lavish spending will also be modeled.

Heck, from what I am seeing, I wouldn't be surprised if the Chinese actually try and outdo and one-up the American culture of excessive spending!

bomlat said...

I don't get the point.
There is many rich people in China,and they get this money mainly from the depresed sallary of the masses.
So,where is the diferent between Banladesh,Chile and China?All of them have a small amount of extreme-riches,and a hugh pile of poor people as a foundation.

When the everyday Chinese in a small vilage will be able to buy a house with mortgage,then we will able to talk about Chinese customers.

Mark said...

So,where is the diferent between Banladesh,Chile and China?

-Chile — Population: 16,454,143

-Bangladesh — Population: 153,546,896

-China — Population: 1,330,044,544

bomlat said...

From a system standpoint the more people mean more complexity.

and the complexity is an issue if you have top-to-down controll system.(the quantity of the connections will be the square of the quantity of the points)

A centraly organised system could work well if it is simple.If it become complicated (let say the export/invesmtent path not working) then you could lost your controll quickly.

So,the advantage above Chile (from a population standpoint) mean higher instability.
And higher instability mean lower growth.

Ty said...

I do not think excessive spending will be coming soon to Chinese people, for the following two reasons.

1. Chinese are still poor, mostly. Of course, there are more and more wealthy people, who are pursuing top brands. Those only happen in big cities. Over 70% of the population in rural area is by no means wealthy. Their disposal income is limited.

2. Tradition rules. One could never underestimate the influence of Chinese tradition, advocating people to be frugal.

Also, it is somehow sad to see that Chinese are becoming materialized within the past 20 years. It probably is the price that people have to pay for the fast economic leap.