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Ka Piu Ku available at: http://www.economist.com/world/asia/displaystory.cfm?story_id=13145087). According to BBC 1 , in 2007, the saving rate of Chinese peasants is 91% (1- consumption rate %). The saving Word Count: 1977/Pin:10634 It is under this economic plan and Chinese consumption culture, which hopes to rate of general Chinese population is 46%, as reported by XinHua News. Whereas, the Ka Piu Ku The recent unfolding of events indicates a world that is increasingly volatile and resolutions.
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Ka Piu Ku
1 | P a g e
Word Count: 1977/Pin:10634 Subject line Can changing the olden consumption culture of Chinese save the economy?
The recent unfolding of events indicates a world that is increasingly volatile and
unpredictable. Under the shadow of the most serious financial downturn after the Great
Depression, elites from every part of the world gathered and contemplated plans to steer
away our economy from the crisis. Many attempts have been devised, some of which
encourage consumption, and China is one of the nations who is implementing
consumption stimulation plans.
Whether the economic plan in China will help the declining economy is still
guesswork. However, it is certain that the plan will jeopardize local culture identity. The
plan is regarded by the Economist as bringing in the western consumption ideals. (Case
available at: http://www.economist.com/world/asia/displaystory.cfm?story_id=13145087). According to BBC 1 , in
2007, the saving rate of Chinese peasants is 91% (1- consumption rate %). The saving
rate of general Chinese population is 46%, as reported by XinHua News. Whereas, the
saving rate of Americans is -0.4% in 2004 and 1.7% in 2008 – a figure fluctuating around
0%. Against this backdrop, Chinese peasants have a habit to save and not to consume.
It is under this economic plan and Chinese consumption culture, which hopes to
change the local consumption culture amidst the economic crisis, I present my essay. I
will begin by illustrating the American and Chinese peasant consumption culture
respectively. Whereupon, I will put forward the consequences that when American
consumption culture is instilled to the rural dwellers. Lastly, I will make suggestions
concerning the current culture against economic development issue and possible
resolutions.
1 “Can China really save global economy” (translated title)
http://news.bbc.co.uk/chinese/trad/hi/newsid_7890000/newsid_7892200/7892269.stm (assessed 4 Mar, 2009)
Ka Piu Ku
Global Initiatives Symposium in Taiwan 2009
Ka Piu Ku
2 | P a g e
Of “Sex and the City” The Americans consumption culture
The confusing definitional problem between consumerism and consumption culture
should be solved for the sake of clarity and framing this essay. Consumerism is, in
economic terms, the belief that the market should be dictated by consumer free choice.
Consumption culture, however, is the consumption habit or pattern. Although American
consumption does not mean universal consumption, it is the icon of western consumption
ideals. Thus, it is employed to illustrate the western consumption culture.
Generally, Chinese tend to save a lot more than many countries.
According to the Adam Smith’s Wealth of Nation 2 , the consumption here is
consuming luxuries goods which, when lacked, are considered a bad conduct. For
instance, as Adam suggests, having a pair of leather shoes is not necessary but it was
considered a necessity of life by both sex in England. Marx Karl defines it as “who dies
with the most toys win”. In other words, under the culture, one’s “self” equals to one’s
material wealth.
2 “An Inquiry into the Nature And Causes of the Wealth of Nations” Adam Smith,
http://www.adamsmith.org/smith/won-b5-c2-article-4-ss2.htm (assessed 27 Mar, 2009)
Bliss or Misery? Contemplating the Engagement of Cultural Forms and Economic Progress
3 | P a g e
The consumption culture is explainable by Maslow’s pyramid of needs3. Referring to
the diagram above, the pyramid has five levels. The top three levels are non-basic
psychological needs. For instance, the desire to be recognized by the others and
accomplishing goals; while the lowest two is basic survival needs. Maslow explained that
it is our innate desire to progress upward when the current level is secured.
America has well-developed social welfare and medical system and pension schemes.
According to the welfare system of American History encyclopedia 4 , there are
unemployment insurance, old age pensions, children aid, medical loans, etc readily
available to their citizens when needed. Against this background, their physiologic and
safety needs are secured.
3 MASLOW'S HIERARCHY OF NEEDS
http://honolulu.hawaii.edu/intranet/committees/FacDevCom/guidebk/teachtip/maslow.htm (assessed 4 Mar, 2009)
4US History Encyclopedia: Welfare System http://www.answers.com/topic/welfare-system (assessed 4 Mar, 2009)
Maslow’s Pyramid of Needs Source http://www.mrdowling.com/602-maslow.html
Relative expenditure percentage by Americans
Global Initiatives Symposium in Taiwan 2009
Ka Piu Ku
4 | P a g e
It is, therefore, Americans basic survival needs are secured. They can afford to, and
they also desire to, move upward and attain loftier values. They adopt an extravagant
consumption way of life which leads to their low saving rate -0.5%, compared to China’s
46% as mentioned. Americans (according to the Percent distribution of total annual
expenditures by major category, Consumer Expenditure Survey 20085) spent 9.2% of
their annual expenditures on apparel and service and entertainment. There are only 0.3%
on reading, 6.9% on food and 1.8% on gasoline, although these commodities are not
infrequently reported expensive. The higher the expenditure that a particular category
shows, the higher preference the population has since Americans are entitled to the free
choices of goods. Their considerable amount of spending on clothing, leisure and
entertainment, when compared to all other items, suggests that American consumption is
placing high values on material wealth on the cost of huge consumptive debts – a debt
which is not employed to generate more income.
5 Consumer expenditure survey, http://www.bls.gov/cex/ (assessed 4 Mar, 2009)
Bliss or Misery? Contemplating the Engagement of Cultural Forms and Economic Progress
5 | P a g e
Let them eat cakes the Chinese peasant consumption culture
As marked by its preference to save than to consume, Chinese consumption, which is
especially notable among peasants, are not asked infrequently by America to consume
more.
According to consumption survey conducted by HSBC (HK), as cited by Xan Dong
international commerce centre6, it is not that people never consume anything unnecessary
in China. Even some peasants have mobile phones now. From the survey, however, the
two biggest driving forces for Chinese to save are purchasing fixed assets (such as
houses) and supporting children education. For peasants, as stated in Chinese official’s
Ban Yei Tan magazine7, they also save out of fear of uncertainties. They believe that one
must repair their house before it rains. Furthermore, they are also constantly ripped off by
the rich that keep their income constantly low despite the surge in national GDP in these
few years. According to the “How Will China’s Saving-Investment Balance Evolve?”
research8 and nominal gross domestic product of China from 1952-20049, the rural saving
rate remained more or less the same regardless of the surging national GDP. (See
Diagram Below)
6 “Chinese turning to consumption culture can stimulate import” http://www.sd-
trade.com/plus/view.php?aid=1355 (assessed Mar 4, 2009) 7 “Stimulating peasants to spend is a short-sigted move”, http://chinareviewagency.net/crn-
webapp/doc/docDetailCreate.jsp?coluid=58&kindid=1221&docid=100873221&mdate=0131001921 (assessed Mar 4, 2009)
8 How Will China’s Saving-Investment Balance Evolve?”, Louis Kuijs http://www.dajun.com.cn/saving.htm (assessed Mar 4, 2009)
9 http://en.wikipedia.org/wiki/File:Prc1952-2005gdp.gif
Global Initiatives Symposium in Taiwan 2009
Ka Piu Ku
6 | P a g e
The reasons for the saving rate remain constant, besides the foregoing two driving
forces, are culture and policies.
Chinese peasants generally cling tighter to a number of olden teachings. They believe
saving up is a virtue, one should not attempt malicious means to seek profit even under
poverty (Confucianism) and to adapt a natural way of life (Taoism), etc. The teachings
and proverbs have made Chinese endure poverty and save. There are also policies that
force peasants to save. For instance, there are countless reports that the medical system in
China does not permit medical loans to patients even in the face of serious illness or
death10 . According to Economic Information Daily, the main pie of Chinese social
welfare system is only accessible by urban dwellers instead of rural peasants11
10 Tears save sick China mother from cremation alive, Reuters
http://www.redorbit.com/news/oddities/308130/tears_save_sick_china_mother_from_cremation_alive/ (assessed 4 Mar, 2009)
11 What kind of social welfare system does China need?, Economic Information Daily, June 26, 2002 http://www.globalaging.org/pension/world/socialsecurity.htm (assessed Mar 4, 2009)
Bliss or Misery? Contemplating the Engagement of Cultural Forms and Economic Progress
7 | P a g e
Against the above grounds, Chinese peasant save because they prefer saving and must
save because of the fear of uncertainties in the future. And their consumption habit,
which turn most of their money to income generating areas, is fitting the current social
system.
The Clash Infusion
The consumption culture in America is backed by well-developed social welfare
system but the one in China is backless. In this part, the consequences of infusing
American consumption culture to china will be analyzed.
The first victims to suffer are banks, especially peasant banks. There are banks that
target peasants in China. For example, the Postal Savings Bank of China, according to
people.com.cn12, has 60% of it depository networks and 70% of its exchange networks
located in rural areas. According to the research “Asian Values”13, Banks in China rely
on the deposit of civilians to provide loans to Stated owned enterprises (SOEs). However,
the SOEs have become inefficient businesses which are very expensive to upkeep (some
of which are due to management buyout attempts). The signs that banks can recover the
debts are fading. The major source of money that keeps China banks alive is the high
saving rate of the population. Peasants thus become the VIP of not only the peasant banks
or also some other commercial banks in China. If Americans’ consumption propensity –
the -0.5% rate– is bought to the peasants, money will be drawn out from banks quickly
leading to a sudden surge in money supply in the market. Worse still, it also increases the
possibility of bank defaults: Peasants drawing out money from banks lowers the solvency
of banks, and insolvent banks prompt clients to withdraw.
12 Turning network advantage to competitive advantage (translated title)
http://big5.people.com.cn/gate/big5/finance.people.com.cn/GB/5907243.html (assessed Mar 01, 2009) 13 “Asian Values” From Dynamos to Dominoes? By Lucian W. Pye (2000)
Global Initiatives Symposium in Taiwan 2009
Ka Piu Ku
8 | P a g e
Besides banks, the construction and real estate market will also be seriously affected.
As mentioned, one of the biggest drives for peasants to save is purchasing houses.
Referring to XinHua news, there are 29% of Chinese peasants who can afford purchasing
houses of $300,000 RMB or above14. While a 7 acreage of a peasant house is selling at
$210,000 RMB (average price per square meter based on carpeted area is $3,500)15, from
the report of news.nen.com.cn. If their savings are to be withdrawn and used, this will
inevitably affect the construction works and the sales of the real-estate market. It is
because there will be less people who will be able to afford buying houses.
Added to the above, the peasant employment will plummet. According to the CEO of
SOHO, Poon Shek Nghai16, every construction projects involves many peasants. Their
biggest single project alone employed 6,000 peasants. When the sales of real-estate fall,
the unemployment rate of the peasants certainly surges.
Last but certainly not the least, as children education is the second largest reason for
peasants to save and the largest expense of them, spending will decrease literacy rate and
prolong poverty in rural areas. It is one of the Chinese peasants’ noblest beliefs that even
they have to endure poverty; they want their children to get out of it by all means. Despite
hardship and hunger, many famers send their children to schools. However, as mentioned
in Gwei Chau Metro News17, due to the high mobility of the peasants, it is impossible to
provide a statistical figure here. If peasants consume like Americans, whose education
expense is subsidized by their government, there will be fewer children going to school to
receive education. Referring to China Labour Bulletin18, children education has occupied
one-third of a family’s total expense generally. For those who have lower incomes and 14Yam Chi Keung says real-estate is not extortionate; peasants can afford houses too
http://big5.xinhuanet.com/gate/big5/news.xinhuanet.com/house/2008-12/01/content_10436634.htm (assessed Mar 01, 2009)
15 Investing in peasant houses is not protected by laws http://liaoning.nen.com.cn/77994956827918336/20071213/2367087.shtml (assessed Mar 02, 2009)
16 Peasants are the biggest victims in the real-estate turmoil (translated) http://64.233.189.132/translate_c?hl=zh-TW&sl=zh-CN&u=http://house.focus.cn/news/2008-10-09/543413.html&prev=/search%3Fq%3D%25E8%25BE%25B2%25E6%25B0%2591%25E3%2580%2580%25E6%2588%25BF%25E5%259C%25B0%25E7%2594%25A2%26hl%3Dzh-TW%26client%3Dfirefox-a%26rls%3Dorg.mozilla:en-GB:official%26hs%3DG6K&usg=ALkJrhgeTEZcJUbQhXapaaYLzXZSFIV2Qg (assessed Mar 01, 2009)
17 Peasant children education to be solved (translated) http://gzdsb.big5.gog.com.cn/system/2009/02/18/010487809.shtml (assessed 02 Mar, 2009)
18 Children Education, lifestyle and housing hinges peasants to consume http://www.clb.org.hk/chi/node/61976 (assessed 02 Mar, 2009)
Bliss or Misery? Contemplating the Engagement of Cultural Forms and Economic Progress
9 | P a g e
many children, it may well be above one-half. Education termination due to budgetary
concerns is not surprising to see. It is, therefore, even they are asked to consume with
subsidies from the government, and the nation will entail a plummet of literacy rate.
The Road Ahead Conclusion and suggestion
To conclude, borrowing the American consumption model into to the rural areas of
china leaves much to be desired. I am not suggesting that the West’s consumption
culture is inherently a bad thing. I agree that when it is practiced appropriately, it can
improve peasants’ quality of life. However, considering the current global economic
downturn and social welfare system in China, it is still too early to ask the Chinese
peasants to drop their saving culture and go spending in the cities. Nonetheless, the
promising fact is that this Chinese consumption culture is not reliant on debt, which is a
healthy sign. And Chinese peasants’ current spending habit, that gives higher priorities to
income generating areas such as education, is positive to the economy as a whole.
Culture cannot be changed overnight. Still, one way to improve the economy is
devising policies that take into account the saving culture of Chinese people. Only after
the poor is exorcised of their survival problems, that they will start to help pushing the
wheel of the economy, ensuing collective wealth. Therefore, to encourage peasants to
spend, instead of direct subsidizing, the Chinese Central Government should allocate
their resources to the social welfare system. Housing loans and education system should
be subsidized and be made more assessable, so that the plans will not conflict with the
old Chinese saving culture and in the meantime secure their basic survival values.
Ultimately, they will be freed from fears, start to consume and boost the economy.
Culture shapes how a person views and approaches the world. Ruthlessly destroying
or changing it for improvident goals should be given a second thought. Culture can be
employed as a nation’s un-outsourceable competitive advantage especially when
everything is outsourceable and outsourced. It is hoped that the Chinese Central
Government can at least preserve one good traditional Chinese value and be respectful of
it.
Global Initiatives Symposium in Taiwan 2009
Ka Piu Ku