On Thursday, China made its latest move to combat the slowdown, cutting key interest rates — the second rate cut in a month.
Chinese remain among the world’s stingiest consumers. Household consumption in China accounted for a paltry 35 percent of the overall economy in 2010, compared with 71 percent for Americans and 57 percent for Europeans.
Chinese also save far more than others, with an average household savings rate of 38 percent in 2010, compared with just 3.9 percent for Americans and 2.8 percent for Japanese, according to figures compiled by Bloomberg Businessweek magazine, using statistics from the World Bank and the Organization for Economic Cooperation and Development, along with other data.
And while younger Chinese have begun to buy more, save less and take advantage of credit more often than their parents, the old habits appear to be eroding slowly and may change only with a new generation.
“I don’t see the need to consume that much,” said Patrick Zhou, 36, a married Shanghai lawyer with a 2½-year-old son. Zhou said he and his wife each save about half their income every month, which still leaves them with enough money to eat out regularly and take a yearly vacation. “We have our house. I have my car. We travel every year,” he said.
The high rate of savings contrasts with the increasingly visible consumerism in cities such as Beijing and Shanghai, which are filled with Ferraris, shopping malls and luxury boutiques.
Precedent and practicality
Chinese older than 50 cling to more conservative spending habits than those in their 30s and 40s, said Shaun Rein, managing director of the Shanghai-based China Market Research Group and author of a new book called “The End of Cheap China.’’
But the exception to the savings-first rule appears to be the 20-something generation, veritable spendthrifts compared with older Chinese, with “an effective savings rate of zero,” Rein said. These Chinese were born after their country’s opening to the world in 1978, grew up with relative affluence and want the latest iPad and iPhone.
The reasons Chinese save more and spend less are complex, stemming in part from tradition and in part from government policies that discourage consumption. People older than 50, who save more than 60 percent of their income, remember a period of economic hardship and political chaos: the “bitter years” of the Great Famine, from 1958 to 1961, and the violence of the Cultural Revolution, from 1966 to 1976.
Some younger Chinese have carried on that tradition of thrift. Tony Ren, a 30-year-old married Shanghai accountant, saves about half his $2,600 monthly salary but says he doesn’t feel he is wanting for anything. “Maybe I’m too busy to have a lot of time spending money,” he said.