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��Home>>China Observer
China enters a negative consumption era
www.chinanews.cn 2004-12-10 15:31:32
Chinanews, Dec 9 - After the People��s Bank of China adjusted mortgage
rates not long ago, the��in-debt millionaires��have become a new topic of
discussion in Chinese metropolises. Experts point out that China has
entered a��negative consumption era��, with credit consumption as a new
symbol of fashionable lifestyle. Among rapidly changing consumption
habits, many young urban professionals nowadays tend to��spend
tomorrow��s income today��.
Credit consumption was not something to be proud of in the old Chinese
tradition, which dictated common people to live within their means. In
the past, people unable to make ends meet could not gain respect from
others as debt was often associated with gambling or alcoholism. After
more than two decades of reform and liberalization, the nation��s
consumers have drastically changed their viewpoint. Many urban and rural
residents, especially young urban dwellers, are becoming more and more
inclined to spend tomorrow��s income today to live a better life.
Under the current market economy, credit consumption is normal and to
some extent inevitable. The government has issued a series of policies
and measures to stimulate the nation��s consumer market, winning praise
in both urban and rural areas, notably from young urbanites. According to
a report by the Chinese Academy of Social Sciences, the average debt
ratio in Beijing and Shanghai families has reached 155% and 122%,
respectively, higher than America��s 115% in 2003. The debt ratio has
reached 90% for residents in some medium-sized cities, where money is
borrowed to purchase houses, cars and large, durable consumer goods.
Since the expansion of the consumer credit system in 1998, outstanding
consumer loans have grown twenty fold compared from sixteen years ago, to
over 1.7 trillion yuan by this June, accompanied by growth rates higher
than any other country in the world.
Many consumers believe that increasing family budget deficits are a sign
of active credit consumption, which depends on borrowed money from
financial institutions. This expands domestic demand as well as improves
the standard of living of both urban and rural residents. The emergence
and development of consumer loans track an economy��s growth. In the
microcosmic view, it results from spending whenever consumption is
desired, by borrowing if necessary. From a macrocosmic view, it is the
inevitable product of shifting from a seller��s market to a buyer��s
market when the economy develops into a certain stage.
While presenting a challenge to the Chinese money management tradition,
credit consumption, in the broader sense, is a positive sign of social
progress.
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