Monday, February 09, 2009

Chinese Savings = Religion

For the past few weeks, I've been spending more time with my grandparents. They came to visit our extended family for Chinese New Year and are enjoying the warm weather and nice accommodations here in Shenzhen. I try to see them at least 3-4x a week and I usually take them out to eat western food - something they enjoy but don't frequently do. 

Even though each of my grandparents still receive more than 3000 per month in retirement from the government as well as consistent money from my mom and uncles, they always stash it away. (My grandparents also have all of their medical bills taken care of by the gov't.) I have been trying for some time now to convince them to spend more money to enjoy their golden years. What’s wrong with more traveling, taking taxis and eating well? They won’t do it, but are always saving. Although they like eating McDonald's and Pizza Hut, they don't like to pay for it.

While the western media argues that due to the lack of a social safety net and social security system, Chinese people absolutely need to save - because the gov't won’t take care of them. I disagree with this notion. 

Saving money is a religion in China, especially for older generations. While some people have plenty of money saved away already, they still do it. Their daily lives have been routine for so long that there’s hardly any time or anywhere to spend the money. Buying groceries in the morning, cooking at home and playing cards and mahjong can only cost so much. 

Migrant workers are another example of savers. They typically make about 2000RMB or less every month and save the majority of it - sending some home. However, if you look at them, they all wear some decent clothes, laptops and all have better cell phones than I do. They just typically save on everyday expenses and sometimes make that big purchase, buying something more than one month's salary. 

I've recently thought that with improving living standards - esp. in the cities, Chinese middle class and white collar young people will evolve to a western-style lifestyle of using credit and spending lavishly without regard for price and cost. 

Some of my friends are like this. They spend most of their relatively high salary 10,000 RMB/month on iphones, designer clothing and taxis. They travel all over China and SE Asia. They're living the good life. I worry that if these people are the next generation, China will save less. 

One recent CNN report made me feel optimistic about these Chinese middle class. It is reported that there is an online group who tries to spend 100RMB/week. That's incredible! These people want to be more consceince of day-to-day spending and to be more mature of managing their own finances. Maybe there is hope yet for China and its future...

Check out the report:


miles said...

In your very last sentence, I seem to detect a fear for China's new generation morphing into the prototypical American who saves nothing and yet still manages to spend the savings of everyone else in the world. It's outrageous, but I think this transformation is inevitable in China to a degree; many won't be able to resist that lifestyle given the choice!

However, if you fear extends deeper to the civilization level--namely that China could one day experience a debt-weight crash similar to the one the US faces today--then you can probably rest easy for some time. What caused the current western collaspe is much more explained by structural deficiencies in our political economy than the lifestyle excess and greed of individuals. I'm not suggesting individuals are not responsible, but our greed and excess were nothing but capital for the political economy to gobble up. In fact, the western system encouraged greed and excess for its own gain, to the point where the system itself started to spin gold from straw. As everyone knows, today there's nothing but straw left.

A good lifestyle is a desire shared by all people, it just so happens that the gold standard is currently set by the west. The Chinese are as entitled to this standard as much as anyone else. Though in the bigger picture, the real question is how closely China intends to emulate the west's post-industrial model of mindless consumption over production, if indeed they will emulate it at all (certainly not anytime soon). Hey you should write a post about this! I'd be really interested to hear your insights.

Thijs (Shenzhen) said...

I'm living in Shenzhen and it's really impossible to live for only 100y from monday-friday, unless you start to eat less meat, cook everything by yourself and don't include stuff like gas, water and electricity.

btw, i'm also maintaining a website about Shenzhen:

I added your blog to my links section, hope you will also add my website to your page (below ShenzhenParty for example).

Anonymous said...

Hi Mike,

Thanks for your wonderfully informative and well written blog about life in Shenzen and China. :)

I think the "CNN Video Living on 100 Yuan a week" demonstrates the maturity and goal oriented mindset of responsible individuals.

The maturity and self-sacrifice exhibited by the savers show that they are NOT spoiled and are willing to plan for the future.
Of course, most will not go to this extreme.

Since the main subject in the video already has a girl friend and plans for future marriage, the future couple doesn't have to impress each other with spending money going out eating, dining, recreation as most adults do.

Thus there will be a mix of savers and spenders. The problem is when there are too many irresponsible spenders who buy when they can't afford too with credit etc.
I'm not sure what level of Credit is available in China yet but there are a lot of lessons to be learned from the US failures here.

Thanks, LA Guy

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