Archive for ‘saving’


China’s Young Migrant Workers Earn More, Send Less Home – Businessweek

China’s younger migrant workers are better educated, spend more, save less, and prefer living in China’s bigger cities. They make up close to one-half of the migrant workforce, according to a survey released Monday by China’s National Bureau of Statistics.

A migrant worker in Beijing

Those from the younger generation, born after 1980—or balinghou (literally, “80 after”)—number 125 million, or 46.6 percent of China’s 269 million migrant workers. One-third have a high school education or higher; that’s 19.2 percentage points more than the older generation, the survey shows.

Unlike their parents, they aren’t inclined to scrimp devotedly in order to send  hard-earned kuai back to the countryside. The average younger migrant worker remitted 12,802 yuan ($2,054) to a hometown in rural China; that’s about 30 percent less than older workers did.

via China’s Young Migrant Workers Earn More, Send Less Home – Businessweek.

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All you need to know about business in China | McKinsey & Company

A lot of people view China business as mysterious. Relax. Consumers behave pretty much the same everywhere. Competition is pretty much the same everywhere. You just need to ignore the hype and focus on the basic fact that in China today, there are six big trends (exhibit). That’s it. Six trends shape most of the country’s industries and drive much of China’s impact on the Western world. They are like tectonic plates moving underneath the surface. If you can understand them, the chaotic flurry of activity on the surface becomes a lot more understandable—and even predictable.

Coauthors Jeffrey Towson and Jonathan Woetzel discuss China’s six megatrends with Nick Leung, the managing partner of McKinsey’s Greater China office.

These trends move businesses on a daily basis. They’re revenue or cost drivers that show up in income statements. Deals, newspaper headlines, political statements, and the rising and falling wealth of companies are mostly manifestations of these six trends, which aren’t typically studied by economists and political analysts. In fact, we happen to think that Chinese politics or political economics are wildly overemphasized by some Westerners in China. So let’s tell a story about each of these megatrends, with some important caveats. They’re not necessarily good things. They’re not necessarily sustainable. For every one of them, we can argue a bull and a bear case. Most lead to profits or at least revenue. Some may be stable. Some lead to bubbles that may or may not collapse. We are only arguing that they are big, they are driving economic activity on a very large scale, and understanding them is critical to understanding China and where it’s headed.

via All you need to know about business in China | McKinsey & Company.

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House-for-pension stirs Chinese debate on elder care

This post and another on China‘s labour force posted today illustrate how fast China is catching up with developed nations, not always for the better.

China Daily: “For 71-year-old Li Yuzhen, a life taking care of a sick husband and a mentally-disabled son in their two-bedroom apartment in the East China city of Hefei has not been easy.

The family of three nets a monthly income of 3,000 yuan ($487), but spends one third of it on medicine. They barely make ends meet with the rest of the money.

Li said they could not afford a nursing home, and she has to stay at home to look after her son, a man in his 40s but still unmarried due to his condition.

In an effort to explore elder care solutions for China’s rapidly aging society, the State Council, China’s Cabinet, vowed last week to complete a social care network for people over age 60 by 2020, when the age group is expected to reach 243 million. This group’s population had already reached 194 million by the end of 2012, giving China the largest senior population on earth.

One solution proposed is the house-for-pension program.

“The plan allows you to deed your house to an insurance company or bank, which will determine the value of your house and your life expectancy, and then grant you a certain amount every month,” said Meng Xiaosu, former CEO of Happy Life Insurance Co, Ltd.

“You can still live in your house, but the company or the bank has ownership,” Meng said.

The program, while only a suggestion, has drawn widespread concern and met with mixed views.

Zhan Chengfu, director of the division on social welfare and charity of the Ministry of Civil Affairs, said the program benefits both the elderly and insurance companies and banks as it can ease elderly care fund shortages, revitalize housing resources and expand the insurance business.

According to a joint study by the Bank of China (BOC) and Deutsche Bank last year, the aging population will leave China with a shortfall of 18.3 trillion yuan in pension funds by 2013 and create a heavy fiscal burden for the country.

Zheng Bingwen, a social security researcher at the Chinese Academy of Social Sciences, likened China’s pension system to a pyramid with the ground level being the basic pension pool, the middle level being companies’ supplementary pensions, and the top level being individuals’ commercial insurance. But the proportion of the total pension funds to gross domestic output is small compared to other BRICS nations.

“We need different channels to supplement funds shortage, and house-for-pension is likely to be a plausible way for elder care,” Zhang said.

However, the proposal stirred a heated public debate, especially among people whose parents have property and fear losing the inheritance.

via House-for-pension stirs debate on elder care[1]|

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China’s Savers Block the Consumer Economy

The Chinese public must be very confused.  The government is urging them to spend rather than save. Yet, government itself is on a serious austerity drive. See post on the cut back in budget for the National Games

BusinessWeek: “Twenty-seven-year-old lawyer Kevin Han is frugal. Breakfast is 5 yuan (82¢) for a cup of soybean milk and a hard-boiled egg or a steamed bun. He has a 20-yuan lunch of white rice, with small portions of meat and vegetables, in the cafeteria at his workplace in Beijing. He spends about the same for dinner. Han gets deals buying clothes online, lives in a cheap rental apartment, and takes the subway to work (4 yuan round-trip). Scrimping is a must if he’s to buy his own place. He says he saves about half his monthly take-home pay of 13,000 yuan. “I want to get married and have a child, which will cost lots of money. My parents are not rich. So I have to save everything by myself.”

China's Savers Block the Consumer Economy

China’s leaders want these super savers to open their wallets and boost​ a slowing economy. Chinese on average put away 30.6 percent of their disposable income, amounting to 6.9 trillion yuan in total household savings in China in 2012, estimates Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong. That’s up from 23 percent 10 years ago. With increasing overcapacity in steel and cement, rising corporate debt, and a growing problem with unregulated shadow finance, Beijing must wean China off investment-led growth in favor of more household consumption—only 35.7 percent of gross domestic product, way behind the 50 percent to 60 percent in many other countries.

Middle-class Chinese like Han pinch pennies to pay for ever-more costly city apartments and save for their children’s education costs. The working class also hoards yuan. Twenty-six-year-old Sichuan native Wei Yinping, a worker in a Shenzhen watchband factory, worries about paying for medical care if she or her parents become seriously ill. She saves almost half her monthly salary of 2,500 yuan. Without a hukou, or household registration card, she can’t avail herself of Shenzhen’s public health-care network. “If I had a local hukou, I would have many social security benefits” and not save so much, she says. Wei plans eventually to move back home and take care of her mother.

One reason the Chinese are champion savers is that earning a decent return is so hard. China’s central bank has kept rates low: A one-year deposit rate offers 3 percent, while loans to support investment by free-spending local governments and state companies go for 6 percent. With inflation, Chinese households earn close to nothing on bank deposits. “Interest rate policy has limited the ability of households to earn income from their savings, and reduced the pressure on poorly performing companies to improve,” warned Andrew Batson and Joyce Poon, analysts at Beijing-based economic consulting firm GK Dragonomics, in a May report.

The government is taking steps to reform the hukou system. It’s expanding health-care and pension plans so Chinese need not save to protect themselves from catastrophe. Regulators are giving banks more flexibility to set market-based interest rates and encouraging lending to the service sector, which is creating jobs. It will take all this and more to unleash Chinese spending power.”

via China’s Savers Block the Consumer Economy – Businessweek.

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