Can Chinese consumers balance fall in US consumption

05 May '10

2 min read

The US was and is still considered the biggest conspicuous consumer of goods in the world. But the financial and economic crisis which erupted in 2008, apart from having its roots in the housing bubble which went bust, was also unveiled when US consumers dug deep in to their pockets and controlled their consumption.

The world is now keenly watching and looking towards India and China in particular to replenish the flagging sales of companies across the globe. But, are the Indians and Chinese consumers replicating their US counterparts.

The consumers of the Asian continent are known for their thrift and an inclination towards saving a bigger portion of their incomes, which is exactly opposite of what the Americans did in the last few decades. US savings rates were amongst the lowest in the world and the splurging was also accompanied by taking on debt.

Savings by the Chinese increased from 19 percent to 22 percent in 11 years, a rise of only 3 percent, well below 24 percent savings achieved by India, over the same period. Over the past decade, China has been working to improve consumer's spending through a variety of frequent incentives. However, China's consumption in overall proportion of GDP continued to decline year after year.

At a recent seminar in China, various speakers tried to analyse the reasons behind Chinese consumers not spending lavishly. According to one of the experts, despite the dynamic economic growth, the Chinese do not have surplus cash, other than which, due to the weak social security system, they also have to be ever ready for accidental expenses.

Another expert suggested that the state should set up a national rights fund based on the equity of state-owned assets, then divide shares equally into the hands of 1.3 billion Chinese citizens, everybody can receive dividend from the national rights fund each year, so that families can increase their spending.

Fibre2fashion News Desk - India

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