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Consumption in-advance or "living within means"?
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09:29, June 10, 2009

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Under the background of the global financial crisis, westerners' and easterners' attitudes toward consumption and savings were quite different. In addition, it provided an excellent perspective for us to observe the "generation gap" phenomenon in Chinese community.

Xiao Zhou's confusion

Mrs. Zhao, who immigrated to the US 10 years ago still can not understand her son —— Xiao Zhou's consumption patterns now.

She knew that her son, a new graduate from university who had just started work could not have high income. However, her son was accustomed to spending money without thinking too much and never worried about the future. Besides the house loan, things from electrical appliances, fitness equipment to a television, a sewing machine and a food processor were all purchased with loans.

"Young people rarely pay for the precious things in full. They certainly prefer divided payments as long as they can get it they never consider bank interest. We Chinese always make every effort to pay more to avoid spending too much interest. Many friends of my generation bought a house by loan and then they worked much harder to pay off the balance as early as possible and release themselves from debts", said Mrs. Zhao.

For parents like Mrs. Zhao, who used to live prudently in China, even if they are now living in the western countries where the concept of consumption in advance is prevalent, they still can not accept such a "cool" attitude towards consumption and saving.

Mrs. Zhao's husband agreed with his wife.

"We Chinese get the tradition of frugality from the past and our generation formed the habit of making both ends meet." Mr. Zhou expressed, "to some extent our generation firmly established our own consumption conception and this traditional value passed from generation to generation. However, the young people do not know our experience of saving wealth through hard work, no wonder they can not understand the difficulty of making money". Mr. Zhou sighed deeply.

Xiao Zhou objected to his parent's stinginess. "They even want to break up a penny into two. Even in China today this concept has become obsolete, not to mention in the west. I am able to earn, why not spend tomorrow's money to enjoy today?"

However, Xiao Zhou has felt upset recently. The unexpected financial crisis broke his repayment plan. Since the downturn in the financial sector, the company which Xiao Zhou worked has dismissed a great many of staff. "If I am fired, how can I pay for my house and car? The United States is a credit society, if I can not pay off the remaining mortgage, my credit record may be ruined". Xiao Zhou felt very depressed as long as he kept thinking about the repayment. It is not just him among young Chinese overseas who worry about this issue.

Opportunities to educate children

In the face of the financial crisis, Mrs. Li, a Chinese lady, who is now living in Los Angeles, had her own tactics.

"We have three family members, the basic cost of our family per month is about 300 USD", she was very proud when talking about her way of saving.

"For food, my principle is only buying seasonal vegetables and fruit, which is not only the cheapest, but also the most fresh; going to Costco to buy meat, fish, eggs, bread , and milk for good food quality and relatively more reasonable prices; cooking by yourself instead of eating processed food. For example, my husband likes eating a Cantonese-style noodle. We bought a few boxes of this noodle when we go to San Francisco. Every morning, I cooked noodles with pig bone soup, flavored bovine tendon, parsley or green onion. It was not only economical but also very delicious."

Mrs. Li believed that the financial crisis was a good opportunity to educate her children.

"I recorded the family income and expenditure in Excel and showed it to my daughter and informed her every time when accruing new household appliances. When she wanted to buy some large things, I would leave the choices to her, letting her to find products related information via the Internet and compare the quality, price, and use in order to exercise her patience and ability to act."

She believed her "children will grow up one day and have their own careers and families; they need financial knowledge to deal with their lives. Why don't we take this financial crisis as an opportunity to educate children?"

The traditional Chinese consumption concept

I believe that many people have heard the classic story about the American old lady and Chinese old lady who met in paradise, one had paid off the mortgage but the other just collected enough money to buy a house. One day, while paying tribute to the American old lady, the Chinese old lady became the obsolete representative of Chinese style consumption concept.

However, under the current environment of global financial crisis, China's prudential financial management style is of value once again.

Data shows that in this financial turmoil, the Chinese have suffered less direct loss. Take housing prices as an example, on April 28, the US announced the latest housing index of 20 cities, which fell 18.6% year-on-year; while the house prices in Chinese communities were basically stable, even increasing slightly. In the US house auction market, Chinese only occupied a very small proportion. This was because the Chinese were rarely over-reliant on loans, and usually bought houses within their own purchasing power. In the aspect of the stock market, insurance and other financial products, the Chinese also suffered less loss because they involved less in high risk products. After all, that is why many Chinese are still keeping the traditional concept of "living within our means". Even in the US' advocating consumption society, the Chinese are still engaging in self- controlled risk.

Although being regarded as conservative and backward by the young generation, the older generation of Chinese consumer can still not accept the consumption concept of "borrowing for living". In the meantime, the global financial crisis triggered by over-consumption by the US further confirmed the Chinese value of financial management of "living within our means". But the Chinese consumption concept does not deny the necessity of moderate consumption; its focus is controlling the risk to spend money rather than not to spend money. This principle is also applicable to the whole nation besides each individual.

By People's Daily Online

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