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Savings in Bank Is Saving Grace?
In recent years, the amount of savings in China's banks has vastly increased, despite many cuts in interest rates.
By the end of January this year, saving deposits reached 6,000 billion yuan (US$723 billion) which could support all the Chinese people for two years, an article in Economic World said.
According to statistics from the International Monetary Fund, China's savings ratio has been at the top of the world's list since the 1970s. Seventy per cent of the money for developing the economy came from bank credit, most of which was individual deposits.
In a sense, it is the individual deposits that are making China's economy develop at such a high speed, the article said.
A survey by the People's Bank of China showed that the trend of saving money in banks is still common among ordinary people and the length of time the money is in the bank tends to be shorter than before.
What does this illustrate?
Many factors affect people's choice on whether their extra money should be saved or invested.
Traditionally, Chinese people think frugality is a virtue. In their minds, the more money they put in the bank, the better. This is even true of those in rural areas, who do not really think about the interest rate -- they just expect their cash to grow safely, with no risks.
Food and clothing are the two main things the Chinese spend their money on.
Although stocks and treasury bonds are now available, many people still think it is a difficult task to choose the best way to invest any extra money.
Many people's income is not as high as they hoped. At the same time, the reform of housing, medical treatment, education and the pension system means people are spending more in these areas.
On the other hand, expectations that their income may fall and thinking about the future, such as paying for children's education, makes people spend less and save more.
The high amount of savings indicates people's habits with their cash have entered a new stage, with them being more mature about their consumption, the article said.
Many think the stock market is too risky; investing in bonds has too many restrictions. In comparison, saving money is more stable.
However, to guarantee this year's target of economic growth and reduce the influence of the Asian financial crisis, encouraging people to spend is essential, the article argued.
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