China's Consumption Dilemma

Saving for a rainy day
Saving for a rainy day


BEIJING – At the recent International Investment Forum, Justin Lin Yifu, the former World Bank chief economist, was asked how he personally invested his money. “All my money is in the bank, in fixed deposits,” he said, before adding with a smile, “When I sleep at night, they are still earning interest for me, so I don’t have to worry.”

For an academic who “concentrates all (his) energy on doing research,” this is Lin’s best option. But in China, he is hardly alone. According to data published by the People’s Bank of China, last month Chinese saving balances surpassed 43 trillion RMB ($7 trillion). According to a Xinhua News report, China is No. 1 globally both in terms of total and per capita savings.

More than half of the wealth of Chinese households exists in the form of savings. The Chinese obsession with banks is based on citizens’ deep-rooted faith in the government. This is also the only way China has known how to drive its economy, and Lin apparently believes that investment is the major force behind China's economic growth. It would then follow that China has to maintain its relatively high savings rate to be able to stimulate investment.

But there are many reasons to doubt that this is indeed the best possible choice. There are traditional reasons why Chinese people like to save. But when they decide to leave their money in the banks, it is often simply a result of their individual anxiety.

A few years ago, when China faced extremely high inflation, and the country experienced up to 24 months of declining interest rates, people watched the real value of their money dry up. The government has now decided to guarantee that Chinese banks won’t go bankrupt. But when the deposit insurance scheme is launched, safeguarding even banks with looming debt-risks, all those Chinese savers will have even fewer reasons to sleep soundly.

So if not the bank, where?

Over the years, government policy documents have called for efforts to increase income for Chinese citizens, but that is ultimately limited because of a lack of diversified investment options. Apart from the risks and pitfalls of financial markets, the housing purchase restrictions and the recent stock market downturn have made people unsure of what to do. And in the end, people feel little choice but to return to the banks. According to the Central Bank’s urban resident savers survey conducted for the second quarter this year, 46.2% of citizens intend to save more while only 18.1% intend to consume more.

Even the Chinese government feels helpless. People’s savings have always been considered the caged tiger. After the 1998 Asian financial crisis, “Drive out the caged tigerbecame an oft repeated slogan. Amid the 2008 crisis, promoting Chinese consumption growth was also the preferred path for rescuing the economy. Alas, this caged tiger has continued to get fatter and fatter, turning round and round in the cage without being able to demonstrate its strength.

In 1998, analysis of why Chinese wouldn’t release their savings concluded that it’s because people are worried by the “three big mountains” — education, health care and old-age pensions. Today, we can add to that the pressure of rising real estate prices.

More savings means less anxiety – in simple terms, that's how most Chinese people feel. Whether in 1998 or in 2008, expanding domestic demand should have meant more consumption. But both times, expanding domestic demand has always eventually evolved into the singular quest to invest and save as much as possible.

The Chinese government thinks it has the answers. It has chosen not to stimulate the economy and not to announce large-scale investment projects. But this is still not enough to push people toward consumption. Instead, the most important thing the Chinese government can do now is ensure that people don’t have to worry about their health care, their children’s education, their retirement and their housing. Then maybe they would start to spend and consume and stimulate rather than stay seated permanently on their savings.

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Migrant Lives

The Other Scandal At The Polish-Belarusian Border: Where's The UN?

The United Nations, UNICEF, Red Cross and other international humanitarian organizations seems to be trying to reach the Polish-Belarusian border, where Belarus leader Alexander Lukashenko is creating a refugee crisis on purpose.

Migrants in Michalowo, Belarus, next to the border with Poland.

Wojciech Czuchnowski

WARSAW — There is no doubt that the refugees crossing the Belarusian border with Poland — and by extension reaching the European Union — were shepherded through by the regime of Alexander Lukashenko. There is more than enough evidence that this is an organized action of the dictator using a network of intermediaries stretching from Africa and the Middle East. But that is not all.

The Belarusian regime has made no secret that its services are guiding refugees to the Polish border, literally pushing them onto (and often, through) the wires.

It can be seen in films made available to the media by... Belarusian border guards and Lukashenko's official information agencies.

Tactics of a strongman

Refugees are not led to the border by "pretend soldiers" in uniforms from a military collectibles store. These are regular formations commanded by state authorities. Their actions violate all rules of peaceful coexistence and humanitarianism to which Belarus has committed itself as a state.

Belarus is dismissed by the "rest of the world" as a hopeless case of a bizarre (although, in the last year, increasingly brutal) dictatorship. But it still formally belongs to a whole range of organizations whose principles it violates every day on the border with Poland.

Indeed, Belarus is a part of the United Nations (it is even listed as a founding state in its declaration), it belongs to the UNICEF, to the International Committee of the Red Cross, and even to the Organization for Security and Cooperation in Europe (OSCE).

Photo of Polish soldiers setting up a barbed wire fence in the Border Zone near Krynki, Belarus

Polish soldiers set up a barbed wire fence in the Border Zone near Krynki, Belarus

Maciej Luczniewski/ZUMA

Lukashenko would never challenge the Red Cross

Each of these entities has specialized bureaus whose task is to intervene wherever conventions and human rights are violated. Each of these organizations should have sent their observers and representatives to the conflict area long ago — and without asking Belarus for permission. They should be operating on both sides of the border, as their presence would certainly make it more difficult to break the law.

An incomprehensible absence

Neither the leader of Poland's ruling party Jaroslaw Kaczyński nor even Lukashenko would dare to keep the UN, UNICEF, OSCE or the Red Cross out of their countries.

In recent weeks, the services of one UN state (Belarus) have been regularly violating the border of another UN state (Poland). In the nearby forests, children are being pushed around and people are dying. Despite all of this, none of the international organizations seems to be trying to reach the border nor taking any kind of action required by their responsibilities.

Their absence in such a critical time and place is completely incomprehensible, and their lack of action raises questions about the use of international treaties and organizations created to protect them.

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