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Time to spend but I'd rather hold on to my money

By Ravi S. Narasimhan (China Daily)
Updated: 2009-04-03 07:42

Xiao Shenyang: It's regrettable that a man should die without spending money at all.

Master Zhao Benshan: It's even more regrettable that a man is alive but has no money at all.

This is not a philosophical discourse on wealth, but the lines that drew the heartiest laughs at the Chinese New Years Eve's TV gala in a much-anticipated cross-talk segment.

The master's repartee, however, hit too close to home - and the laughter was a little forced.

As the government tries to wean the economy off the over-dependence on exports, consumption has become the catchword - and many people I know are ambiguous about opening their wallets when their gut instincts tell them it's safer to clutch on tightly.

The anomalous explanation is: If we want to continue becoming wealthy, we need to spend more to keep the economy growing.

Consumer spending accounts for less than a third of the economy, compared to about two-thirds in the United States, so it needs to account for a bigger share of the pie, runs the economists' line.

So if we dipped into savings - in the line of duty - the economy should theoretically grow stronger, though I am not sure such an inverse proportion works. All I do know is that it will make me poorer.

It's not as if the Chinese have been parsimonious. In the past decade or so, retail sales have been growing at a frenetic pace, the market for luxury goods has witnessed the highest growth in the world, cars have become commonplace and property prices driven to stratospheric levels.

But given the current dire economic situation we are now in, common sense dictates that we'd be better off not throwing good money after bad.

So will bad money turn good - and bring back the good times - if we keep throwing enough of it?

Isn't that what brought us to this in the first place: Americans, fed on easy and cheap credit, spending their way to a crisis? And their government running trillion-dollar deficits?

The explanation most often cited for the high savings rate in China is that the social security net is inadequate - and people salt money away for children's education, medical bills and retirement. Reason enough.

The other is traditional Asian values which encourage thrift and frown on profligacy. But there is mounting evidence that the young do not subscribe to that and are just as quick with drawing the credit or cash card out than their peers in the West.

South Korea went through an economic crisis a few years ago, groaning under the weight of credit card debt racked up by the younger generation.

Yet, prudence has to be put aside, we are told, and spending maintained to keep the economy growing and hope the US economy grows enough for Americans to start spending again ... and meanwhile, all of us rack up debt.

I confess I previously subscribed to Xiao Shenyang's take on life. Now, Master Zhao makes more sense.

E-mail: ravi@chinadaily.com.cn

(China Daily 04/03/2009 page8)