If Li Keqiang, China’s premier-in-waiting, reads the newspapers, he would have been dismayed to learn about Guo Hao and his wife – a young couple from the eastern city of Nanjing who save 90% of their meagre salary.
While economies in the West have suffered in recent years because people have spent too much (and saved too little), China has the opposite problem. Its citizens still aren’t spending enough.
Boosting domestic demand is a key component of the government’s plan to wean China off a growth model dependent on investment and exports.
Consumer spending as a percentage of GDP is still growing, but it forms a much smaller part of the economy than in places like the EU and the US. Compared to last year, its growth has also been slowing.
“International experience tells us that large countries, developed or developing, owe their economic development mainly to domestic demand. Therefore, boosting domestic demand is the only way to place China’s development on permanently solid ground,” Li Keqiang advised in an article in the Party journal Qishi in April.
Li is strongly tipped to take over from Wen Jiabao as China’s prime minister at the 18th Party Congress next month.
Although the young couple from Nanjing did not explain why they felt the need to save so much, other savers often cite feelings of insecurity as the main reason for their financial conservatism.
But just how typical are Guo and his wife?
Interestingly when Guo wrote about his family’s 90% saving rate on an online forum he did not encounter many like-minded people.
The first question that other contributors wanted answered was how, on a combined income of just Rmb10,000 ($1,601) a month, the Guos could manage to save so much.
Many young Chinese now describe themselves as belonging to the ‘moon tribe’ – those whose salaries have run out by the end of the month.
Guo, who is in his twenties, dutifully replied: “I am employed at a state-owned enterprise and my wife is a nurse, so our lunch is provided by our employers. We buy food at a discount when the shops are about to close and we eat at our parents’ place at the weekends.”
He added that the couple live close to their workplace to save on transport costs, buy their clothes from street vendors or online, and make sure that they take a lot of fruit home with them from visits to their parents.
In total, Guo’s case generated close to half a million posts online. But rather than praise for his ability to make his salary go so far, Guo was often chided for being miserly. “Living off the state and your parents like that, you should be ashamed,” wrote one contributor, while others said the Guo’s lives sounded sad and boring.
“What’s with these two?” asked one. “They sound like an elderly couple.”
“That’s no way to live. Get out and sing some karaoke,” said another.
Others saw the Guos frugality as fairly pointless, as property prices would still be out of reach even after years of disciplined saving.
There was also the suggestion that saving made little sense when inflation was eating up the pitiful interest available on bank deposits.
“You can’t beat the banking system, you may as well just spend it,” quipped one netizen.
If views like this are more representative of China’s youth, perhaps Li Keqiang doesn’t have to worry about domestic consumption after all.
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