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Traditions of Saving and Consuming in China

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Traditions of Saving and Consuming in China

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Traditions of Saving and Consuming in China

Traditions of Saving and Consuming in China

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The American consumer and the Chinese saver have become twin engines of the global economy. Chinese currently save 40 percent of their Gross Domestic Product, allowing Beijing to buy U.S. treasury bonds. That in turn allows Americans to borrow and consume far more than they earn and produce. But some economists say China's unnaturally high savings rate retards domestic consumption. Only when Chinese feel more confident about social security, health and education costs, they say, will they open up their wallets more freely.


From its massive trade surplus with the United States, to its funding of America's ballooning deficit, China's economy has become increasingly intertwined with our own. Now this wouldn't be possible without the extraordinary thrift of ordinary Chinese who save about half of what they earn, but as NPR's Anthony Kuhn reports from Beijing, this frugality can cause its own problems for China's economy.

Ms. DUN YEIN: (Chinese spoken)

ANTHONY KUHN reporting:

In northeast Beijing, 58-year-old Dun Yein(ph) is making a deposit at a post office, which also functions as a savings bank. She's depositing the equivalent of $120. That's roughly a month's pension for Dun, an ethnic Manchu woman who retired a few years ago from her job at a semiconductor plant.

Ms. DUN: (Chinese spoken)

KUHN: Back home, Dun makes tea for visitors. She explains that like other people of her generation, her spending and savings habits were formed during the 1960s and '70s, an era when food and material goods were scarce and nothing of use was wasted or discarded.

Ms. DUN: (Through Translator) In those days, we needed a little booklet of ration stamps to buy everything from bean starch, noodles and sesame paste to soap and detergent. The amount was limited. We didn't even see peanuts or melon seeds except on holidays.

KUHN: China's society is aging faster than the government can build Social Security and health insurance systems. As for Mrs. Dun, she started saving a third or more of her income when she opened her first bank account decades ago. She sees no reason to change her financial habits now and she has no interest in credit cards, loans or insurance.

Ms. DUN: (Through Translator) I won't buy things on credit. If I were to borrow money and to spend what I hadn't already earned, I'd be nervous. I'd always be thinking about what I owe people. If I have extra money, I save it. If not, I just to get by as is.

KUHN: China's high savings rate allows a high investment rate. This helps Chinese factories churn out more goods for the US market. It also enables China's central bank to buy US dollars at the rate of some $20 billion a month. This in turn keeps US interest rates low, allowing Americans to borrow and consume more than they earn or produce. But economists warn that it's risky for China to produce so much more than it can consume. Tuong Minh, a chief economist in Beijing for the Asian Development Bank, notes that China's state banks are doing a poor job of allocating the money from savers' nest eggs.

Mr. TUONG MINH (Chief Economist, Asian Development Bank): But with 45 percent GDP investment, China created 9.5 percent GDP gross. Similar, a country like India, a saving rate or investment rate of around 24, 25 percent, that create a 7 percent gross. So you can see the efficiency and China's quite low.

KUHN: Tuong says that the government could boost consumer spending if it invested less in often unprofitable factories and more on health, education and reducing poverty. He adds that the answer to the savings rate problem lies partly in future generations of Chinese.

Unidentified Child: (Chinese spoken)

KUHN: Du Yian(ph) and her niece, Chen Wen(ph), go to pick up Chen's daughter from school. Chen is 29 and works in retail sales. As her daughter makes paper cutouts, Chen explains that her financial behavior is very different from that of her aunt.

Ms. CHEN WEN: (Chinese spoken)

KUHN: `I have some savings, but when I have to spend, I may use it all at once. I don't really save money.' Chen wears a black fleece vest and carries a folding silver cell phone. Her wallet bulges with credit cards. She says she was recently confident enough about her economic future to shorten the term of her mortgage from 15 years to 11. Eventually Ms. Chen and people like her will transform China from the world's factory into the world's marketplace, but economists say it could take years or even decades.

Anthony Kuhn, NPR News, Beijing.

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