Chinese savers decry falling deposit rates but still won’t spend more

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Beijing/Singapore: After reducing Chinese banks last week, Marrow Chen launched a social media pool: “When interest rates fall, do you save or spend?”

“More than 80 percent of the reaction of about 5,000 5000 reactions chose savings, which identified the challenge for policy makers seeking demand and economic growth,” said a 37 -year -old young man working for an Internet company in southern China, adding, “I am not sure when my company can survive,” he said.

China’s Central Bank last week eased monetary policy to limit the loss of trade war with Washington. On Friday, he reduced the roof for accumulated rates to remove margin pressure on banks and indicated rescuers to spend more or invest more.

But in recent years, continuous deductions in rates collected have failed to prevent explosive growth in Chinese domestic savings, raising concerns over the country’s consumers on the side effects of low return, which create their own safety net.

Official data shows that at the end of March, domestic reserves exceeded 160 trillion yuan ($ 22.3 trillion), which equates 10.3 percent of the year ago and 118 percent of the previous year’s gross domestic product (GDP). In comparison, retail sales increased by 4.6 % in the first quarter year by year.

Global Data Dot TS TS Lombard APAC senior economist Manoxying Liao says low interest rates for China’s population “potentially reduce income” low interest rates, especially those generated in the 1980s, can cost less than the cost of safer in the coming decades. As a result of a long property crisis.

Liao and other economists say the best policies to increase consumption in China are reinforcing their pension system and other social benefits to prevent homes saving needs. After losing his marketing job a year ago, the 30 -year -old Lawrence Pan, who is now a freelancer, no longer pays his social insurance contribution, though he can choose it.

She itself prefers to save money because she does not trust the state system, which the Chinese Academy of Sciences sees by eliminating the money by 2035. The Pan saves about two -thirds of her income in her current account. He says the fixed term savings offers little interest to worry about the reserves.

“I think if my savings and spending habits would be more balanced if the deposit rate was high, there is more indication of the interest rate that the economy is improving,” Pan said. “In such a scenario, I’ll spend more.”

‘PANCELS’

China has repeatedly promised domestic consumption – which is less than 20 percent of GDP points – a major economic growth driver.

The world’s second -largest economy relied heavily on exports last year to have a target of about 5.0 % extension, and analysts say, demanding maximum urgency on US high prices to balance the economy towards domestic demand. But low interest rates can work against this purpose.

Carnegie China’s senior fellow Michael Pettis says he facilitates the transfer of resources through households – primarily in China’s case, in China’s case, business and public sectors, which are pure lenders.

“In today’s financial system like China, and in the 1990s, Japan, low -interest rates do not promote consumption.”

Elizabeth Virenskold, senior economist at FATTM Consulting, says that the softening of monetary policy in China depends on the cost of borrowing many businesses in a long time, which causes the entire industry’s “zombies”.

She says cash flow in sectors such as construction, airlines, travel and computer services covers less than five months of interest costs, which have been termed as less than five as a “risk zone”. “This is like a bit of pain,” said Vernscold. “You can cure pain, but unless you treat the source, you will continue to take the pain, which increases the risk of negative side effects.”

Thaphti family can also force measures to cost the entire economy, which is at risk of a deflationary spiral. The 32 -year -old book editor Erin Yao, last year, moved from Beijing to Central China to save more of his income in Wuhan. Converting its company’s strategy into low -cost books makes them worried about the economy, so they intend to keep the money aside in the rain days, even if the deposit rates fall to zero.

“My first reaction to deduction in deposit rate was: Has the economy entered into the downturn?” Yao said. “I will no longer spend all my money to enjoy life. If I get sick, I will put something aside.”