China Trade 101: For the Chinese Consumer, Money Doesn't Grow on Trees

Filed in archive Entrepreneurship on February 12, 2008

China's economy is hot. And money in China is changing hands at an incredible pace. That leads many Western business people to assume that the average family in China has lots of disposable income and that they spend it freely. Not so...

The China Vortex recently discussed a report on consumer behavior in major cities in China. "According to the report, consumers are still frugal, and are reluctant to go into debt," CV said. There are some reasons for that.

There are some reasons for that mind set.






Communism, after all, ain't what it used to be. One source I looked at talked about the slow repeal of social programs in China. Cradle-to-grave welfare in China is gone. the average Chinese household is without unemployment insurance and without the guarantee of a job (a fixture in China's past). There's doctor and hospital bills to be paid, pension plans to contribute to (if they exist), the cost of school for the kids, and housing costs. Inflation has hit grocery stores. And taking care of the the grandparents has become a major financial burden for many families.

China developed a Consumer Confidence Index last year - and it's down.

The point is that China might be a growing market for lots of things. But it is not a bottomless market. And it is not immune to problems.