Data recently released from the National Bureau of Statistics showed that the saving deposit of urban and rural citizens in China has reached 9.43 trillion yuan, up 17.1 percent from last year, with deposit growth rate beating income growth.
This indicates that officials’ call for increasing spending have been ignored to a large degree. People from different sectors of society hold different philosophies about consumption, and some economists believe that spending is not a way to stimulate the national economy.
Lack of money, lack of confidence
Although economists and the media advocate to boost domestic demand, the man on the street still wants to hold onto the money in his pocket. Since the public saving deposits reached 6 trillion yuan in 1998, economists have made loud voices to encourage people to increase their consumption. After a series of governmental promotions, the public deposits continued to increase (by one trillion at a time), an evidence of the common people’s lack of interest in advices given by the government and its experts.
Social reality shows that the huge amount of deposits does not mean that the real public purchasing power is great.
Xiao, a retired teacher living in the southern city of Beijing, believes her deposit gives her sense of security, even though she has a pension and medical insurance, and her children all have stable jobs. “How can I deal with emergencies without having at least several ten thousands of yuan saved?” she said.
Before 1990, Xiao’s family had only several thousand yuan on their savings account. Thanks to the rise of salaries and high interest rates in the following years, she now has a much larger deposit. Though in recent years, interest rates have been going down and an interest tax has been charged, indicating a good time to spend, she still keeps her money in the bank because she cannot find a good channel for investment.
Compared with Xiao’s family, many low-income families are not as lucky. Facing problems such as unstable jobs or even unemployment, poor social security, roaring education expenditure and other financial burdens, they still worry about their futures.
Some experts hold that the reforms launched in recent years, such as that in education, medical care and housing, all means more money needed for a family.
A dilemma for the rich
Contrary to the common assumption that people in the high-income group spend more, a survey shows those families intend to spend less.
Many who are relatively affluent said that their basic living demands have already been satisfied and there are not many things in daily life that require them to spend money. What they are concentrating on now is how to invest and save their money wisely for the future.
Since the consumption of affluent families is important to the national economy, it is believed that families of this group should be encouraged to spend more. The dilemma is that there are not yet enough products to meet their more individual, characteristic, and even luxury demands. In addition, some who got rich via undisclosed or illegal incomes dare not spend too much for being afraid of exposing themselves. In general, although the rich are concerned about increasing their wealth, they still lack investment opportunities.
Some experts believe that the emphasis of luxury consumption by the rich is not a good idea. Apart from causing tremendous waste, their luxury lifestyle may have a negative influence on social morality.
Living in extravagance is against the traditional Chinese virtue and it runs contrary to the current national condition. So it remains a question how the rich can go out of the dilemma in spending.
Limited potential of the rising middle class
White collars are mushrooming in big and medium-sized Chinese cities. The consuming level of this group has shifted from 10,000 yuan to 100,000 yuan, giving many experts an optimistic belief that this rising middle class will stimulate domestic consumption as a whole.
According to relevant data, the consumption of this group concentrates on cars, houses, digital products, books and magazines, audio and video products, flowers and gym products.
Most of the middle class people are young, with high incomes and know-how about how and where to spend their money. However, as many of them face problems such as marriage, children-bearing, housing and continuing education, their potential in consumption is limited.
Mr. Zhao and his wife have a 20,000-plus yuan monthly family income. He told this reporter that they are not just spending what they earn but living in debt. He listed his monthly spending as follows: 2,000 yuan for daily life, 1,500 yuan for transportation, 1,000 yuan for the child, 1,000 yuan for their continuous studies, another 1,000 yuan for various insurances, saving only 2,000 yuan for emergencies such as aging, sickness, unemployment, child’s education and accidents. Sometimes they need to send money to their parents too. Life is hard and they have to struggle to make ends meet.
Little Huang, a certified public accountant, earns 8,000-plus yuan a month. He told the reporter that he changed jobs several times after graduation and finally settled down to this one after passing his certification test. It happened only in the last two years that he earns a better salary, but his expenditure has soared as well. Until now, he cannot afford buying an apartment because he has not yet enough money for the down pay. “Though it’s a common thing these days to consume on mortgage, you have to consider your solvency in the future,” he said.
Some economists point out that an unsatisfactory consuming environment is the main obstacle for the middle class’s spending. Dr. Sun Xuegong from the Economic Institute of State Development Planning Commission believes that some consumption promoting policies are ineffective. For example, although the state advocates private cars, the old policy on car purchasing hasn’t changed, maintaining a high market price so as to restrain official car purchasing. The many taxes for private car owners, too, make potential consumers step back.
In general, China’s middle class is far from mature and it accounts for a small fraction of the whole population. Their consuming potential is greatly limited due to the incomplete social security system and consuming environment.
More channels needed to boost public consumption
To Stimulate consuming and initiate domestic demand is the national call at the moment. Spending is not just a private affair but crucial information for manufacture. Poor consuming may cause low production, unemployment and reduced incomes, which will result in economic recession. This vicious circle will cause harm to both the state and the public.
The government has racked its brain to create effective measures to stimulate consumption, issuing national bonds in 1996; supporting stock fever in 1998; reducing interest rates and increasing salaries in recent years.
“Basically, people share similar consuming perspectives: when you have enough money, as well as the confidence in your future, you will spend more,” said Huang, a certified public account.
The problem of keeping their money in the bank does not lie in people’s consuming psychology and habits, but in relative social regulations, said Cheng Weimin, associate professor of the Department of Sociology, Beijing University.
There should be different measures for each social sector to encourage consuming, said Liang Wei, chairman of the Commercial Committee of Beijing Municipality. The most effective way to enlarge consuming, he maintains, is to increase consumers’ income so as to help more people upgrade into a 10-100,000 yuan market. “Only with money in hand, can they consume with confidence,” he said.
As for the rich, more investment channels should be created so as to let their money flow into manufacturing and distribution fields to serve the society.
On top of that, there should be categorized consuming products, more consuming fields and better individual services. Some experts hold that the general concept of consumption should include manufacturing consumption, living consumption and investment consumption. The construction of infrastructure projects such as roads, bridges, communications and electricity facilities, for example, may absorb investment from the public by issuing bonds and stocks. This is an ideal way to increase consumption.
Most exporters share the belief that the primary task of encouraging consumption is to help the public create confidence in the future.
(China.org.cn by Li Liangdu April 19, 2003)