Your correspondent had a business textbook in university that illustrated, with neat little box diagrams, the cultural differences in economic behavior between East and West, specifically that Americans buy everything on credit while Asians stow all their money in low interest bank accounts like pack rats.
Analysts still harp about Asian resistance to consumer credit, often using Confucian clichés such as in a 2006 article in Marketplace by Bloomberg:
China’s frugal mentality dates back 25 centuries to the philosopher Confucius, who said: “He who will not economize will have to agonize.”
Culture serves as a nice way to explain away inconsistencies one is too lazy to investigate, until evidence to the contrary can no longer be ignored.
Danwei guest contributer Shaun Rein makes this point with credit cards, arguing that Chinese, especially Chinese youth, have a growing demand for consumer credit as their salaries rise along with their choices in where to spend.
Obstacles still persist, however. Most of China’s banks ignore consumer credit as they focus on lending money to state-owned institutions who then pour the money into an overheated stock market. China also lacks the West’s mechanisms for credit checks, which means stiflingly low credit limits.
Nonetheless, the future is bright for consumer credit in China.
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- Shaun Rein is managing director of China Market Research Group (CMR)
- Marketplace by Bloomburg: Frugal Chinese Puzzle Credit Card Issuers