Sunday, December 7, 2008

New York Times: China's Economy, in Need of Jump Start, Waits for Citizens to Loosen Fists

Now overlay the last story with this one, and then compare the attitudes of citizens towards savings here (or in Japan) versus the conspicuous consumption culture we celebrate. It is one stark difference - people who act like this in America are viewed as "strange" or "out of the ordinary". And why at the individual level (not for all, but for many) and national level, we rely on the generosity of others to be our creditors. Once more, one of the more interesting "fallouts" over the next 5-10 years will be to see the cultural and attitude changes that potentially (or not) happen after this "lesson". We'll see how soon we forget.
  • He does not know it yet, but Dang Fu has been tapped to save the Chinese economy. A ruddy-faced millet farmer from northeast China, Mr. Dang, 56, has managed to save two-thirds of his family’s $2,200 annual income in recent years. He grows much of his own food, wears a winter coat until it is ready for the rag heap and buys niceties only when his wife’s nagging becomes intolerable.
  • Last year’s indulgence, a new 25-inch television, still makes him wince. “It was painful to spend so much money,” he said, strolling through the aisles of a supermarket last week with his prodigal sister-in-law (she saves just half of her salary).
  • But such tenacious thrift, once an admirable quality here, has become a liability as the nation’s export-driven economy slows, a prospect that has stoked the government’s fear of unemployment and social instability, and that could threaten the Communist Party’s hold on power.
  • Government analysts are looking to consumers, especially the country’s hundreds of millions of high-saving peasants, to pick up much of the slack. “If we can boost people’s confidence and they spend more money, it will not only be beneficial to China but it will help stabilize the world’s economy,” Zhu Guangyao, the assistant finance minister, said last week. (I encourage a citizen exchange with Americans - you know a 1 for 1 trade for 6 months - plunk those peasants into a lifestyle of malls, celebrity culture, and "acquiring more toys than the Joneses", and send the Americans to be pig farmers or bean growers - that'll teach those Chinese folk how to spend like a true patriot! Or simply get your President to tell the citizens that the terrorists have won if we don't shop - it worked wonders here)
  • But getting people to spend more, especially in the face of an economic slowdown, may be a tall order. Consumer spending makes up 35 percent of China’s G.D.P., and that number has been dropping since the 1980s, when it stood at 50 percent; consumer activity in the United States, by contrast, is responsible for more than two-thirds of the economy.
  • As part of subsidy programs... the measures include subsidized housing to persuade homebuyers to fill their new dwellings with furniture, and rural electrification projects that will give farmers access to affordable power. On Monday, the government introduced a subsidy in 14 provinces that would make it cheaper for people to buy cellphones, washing machines and flat-screen televisions. (sounds good, we'll do the same thing here, but we don't mess with small stuff like that - we do it for homes - Americans need no major incentive to buy those small gadgets you speak of - all it takes is a Best Buy flier and a post Thanksgiving morning and they herd like cattle outside stores at 3 AM - again, about that citizen exchange program... a lot can be learned)
  • Mr. Dang and his wife, Zhang Fengxia, 52, are the apotheosis of Chinese thrift. They do not use banks — “better to keep money at home,” Ms. Zhang said — and the couple’s biggest expenditure was a used tractor they bought for $1,200 a few years ago. Everything else is set aside for their retirement and for potential medical costs.
  • Although high savings rates can be found across Asia, the Chinese propensity to save is rooted in deep-seated memories of scarcity and a tattered social safety net that forces people to save up for education, retirement and medical costs. The government has introduced a subsidized health care system in the countryside but most Chinese, rural and urban, live in fear of medical emergencies. (well some things are the same in both our cultures)
  • In addition to health care reforms and reliable social security benefits for retirees, Ms. Wang and other analysts say the floodgates of personal consumption may have to await a marked rise in wages. “That is something that will take years, not months,” Ms. Wang said. (hmm, more similarities)
  • For the moment, it is people like Li Xiuqing who hold the greatest promise for China’s emerging consumer economy. A secretary in a Beijing accounting firm, Ms. Li, 28, makes less than $600 a month but she spends almost every yuan on stylish clothing, restaurant meals and prepaid minutes for her fuchsia-and-gold Nokia cellphone. (ah the great hope! The youth of the world - bathing in American consumption habits - thank god for the internet where people can learn our habits from 8,000 miles away) Raised on a hog farm in Hunan Province, she laughs off the penurious ways of her parents and grandparents. “The most expensive thing my father ever bought was a wristwatch,” she said as she picked up a $100 pair of stilettos at one of the capital’s ubiquitous malls. “China’s days of starvation are over.”

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