3 Main Reasons Why Chinese People Save

He who does not economize will have to agonize.  ~Confucius 

Photo Credit: China Internet Watch

If you're dead serious about wanting to save some cash for your future, you might want to look at why and how Chinese do it. Chinese people save more than a third of their total incomes. When you come to think of it, it is way more than Americans, for example, who currently set aside just 5% of their incomes. Chinese have a personal savings rate of 25 percent and a national savings rate (which includes corporate savings) of 47 percent in 2005.

Growing up in a small town wherein most establishments are owned by Chinese people, I developed a notion that they are rich people. Later did I learn that not all Chinese are born with silver spoon in their mouth and most of them actually earned and saved their way to where they are now.

China ranks #53 worst worldwide in terms of income inequality, with a Gini index (measuring wealth inequality) of 41.5. In comparison, the U.S. ranks #40 worst with a Gini index of 40.
[ CIA World Factbook, accessed March 2011 ] via

There were actually stories from my older colleagues that during the Marcos era, Chinese people actually moved in the Philippines to serve wealthy Filipinos. It's funny how the times and tables have turned today.

In 2008 a study by St.Louis, China’s saving rate is one of the highest in the world. The figure below shows that China’s personal saving rate is about 25 percent and national saving is roughly 47 percent of GDP (in 2005, compared with 0.5 percent personal saving and 12 percent national saving in the United States)—and these savings rates have increased in recent years.

Why Do Chinese People Save? 

While there may be the usual social security reasons as to why Chinese people are saving more than they are spending caused by their dilapidated social welfare system causing fear and the need to save for their health care, social safety and private education and many other services that are supposed to be covered by the government, below are just 3 of the most intriguing reasons that affect their spending and investing habits.

1. Mortgage
Chinese men find mortgages a prerequisite for marriage which explains why China is currently facing a problem with having too many single men. Yang Jiah, along with other Chinese men, believe that their ticket to getting married to a decent Chinese girl is to own a nice property. 

One of the strongest motivations why I currently save more than I spend is that I want to save for the rent-to-own house which we will hopefully move in on September this year. However, unlike those Chinese men, I am saving for this property because it has always been a dream since I was a kid. I grew up like an NPA (No Permanent Address) because me and my mom would always transfer from one place to another. Such situation has helped me to become inspired to really work hard and strive to change it. 

2. Wedding
The first motivation for Chinese to save for a property is actually linked to their second strongest motivation which is in order to be married, they need to save enough money. According to BBC, "Every year in China more than ten million couples tie the knot. Weddings are a multi-billion-dollar business and expenses for the big day can quickly spiral out of control."

3. Luxury
China is world’s second largest consumer market for luxury goods, behind only Japan (after passing the U.S. in 2009) and expected to be bigger than that of Japan by 2014. 

China's saving and spending habits are clearly being greatly affected by their being family-oriented. You can see that most of them save for the wedding, parents retirement and the kids education. May I encourage you to think of something you want to improve in your life and make it your biggest motivation and source of strength as you journey towards saving for your future so it will be easier for you to be focused in reaching such goal and would make the journey worthwhile.


David James Sneen said...

Many people find themselves hit hard because they did not prepare for the economic downturn. Your points about the Chinese are an indictment on Americans as we spend well beyond our means-and that lack of control hurts us and our families. You made a great and timely comparison!

crumpylicious blog said...

so true!