The Chinese Can’t Kick Their Savings Habit

04-May (Bloomberg) — The Nies can afford to spend more. The couple live with their 5-year-old daughter in an apartment they bought in Beijing in 2009, when real estate was more affordable. He teaches English at a local college; she’s a hospital researcher. Together they earn about 20,000 yuan ($3,226) a month. After paying the monthly mortgage of 3,000 yuan, another 3,000 yuan for kindergarten fees, plus household necessities, they have plenty left over.

They could eat out or plan a vacation. Not a chance, says the teacher. To stick with their plan of investing in a fund for his parents’ medical or other needs, preparing for his and his wife’s retirement, and putting away cash for their daughter’s education, the couple are trying to save at least half of their income. “We’re not confident about government policies for the long term. Most Chinese feel insecure, so we try our best to put aside as much as possible,” he says. (Nie asked that only his surname be used: He isn’t authorized by his college to speak to the media.)

Chinese policymakers say their country must end its reliance on investment in factories and infrastructure for growth and rebalance to a more consumption-driven economy. Yet the Nie family is the norm in China, where the average Chinese household socks away about 30 percent of its disposable income, one of the world’s highest rates. The downside of saving so much is that consumption makes up only about 35 percent of gross domestic product. U.S. households save around 5 percent to 6 percent of their income, and consumption accounts for about 75 percent of the economy.

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PG View: What isn’t covered in this piece is what percentage of the saving is in the form of gold . . .