China’s savings habit
I want to highlight the good work of the BBC again. The last time I featured one of the BBC documentaries, it was about (conspicuous) consumption in China and the push to get Chinese citizens to spend more in order to support the economy. Today, I want to highlight another BBC documentary, this time on Chinese savings.
The Chinese are world-class savers. So much so that western economists have concocted a theory called the Blame Asia meme which puts the recent financial crisis squarely on the shoulders of Asia.
But, one must ask why the Chinese are saving so much in the first place. The twenty-three minute clip below demonstrates that it has much more to do with necessity — the one-child policy and a porous social safety net – than anything else.
I subscribe to the BBC Documentary Podcast and have featured these clips here before — on reports by Michael Robinson on the U.S. housing bubble and the Latvian collapse in particular. I recommend it highly. The BBC releases maybe 5 audio podcasts per week of about 22-25 minutes in length. You can access this audio clip, visit the back catalogue, or subscribe to the podcast at the link below.
Source
Assignment – China Saving’s Habit – BBC Website
In China they do not have pension… they do not have a social net. There are no benefits..
So, if you want anything, you have to save for it.
If you want a safety net, you save for it..
Generally because of this, the family unit is tighter…
Parents help kids out (say a deposit for a home).. kids support parents.. no need for “paid” child care.. grandparents step in (apart from just spending more time with them).. the money is just pooled…
Of course the downside is that a family could have their saving s blown in the event of an emergency.. but on the other hand.. what do you think the government is downing with your tax?
A good compromise/hybrid model is Singapore. The government “encourages” savings, but this is ringfenced for your needs/pension. This tax is not excessive, so you still have the family savings as traditionally you still have the intra-family support.
https://en.wikipedia.org/wiki/Central_Provident_Fund
In China, if one has a connection with high profiled administration, he/she can borrow a lot of money with lower rate than the saving rate, then those money goes to saving accounts.