We are only human after all

The Chinese are not the savers we think they are.

Woman with shopping bagsIf you find that you overspent this festive season, you are not alone. Despite being touted as the biggest savings nation in the world, even the Chinese are proving to be as in love with spending as the rest of us.

On her recent visit to China as part of the World Economic Forum’s Global Shapers, Mosidi Modise, an analyst Allan Gray, discovered that while the older generation were really big savers, the youth – well, not so much.

“Although I had a limited sample and generally spoke to individuals that lived in a first-tier city in China, a lot of them commented on how the older generation were much better at saving than the younger Chinese millennials. China went through a prolonged period of scarcity during the Cultural Revolution. The Revolution bought about massive uncertainty in the country, from a political and economic perspective, which resulted in people needing to save whatever they could. Many of them lost everything which is why the older generation remains frugal. The younger generation however, have grown up in a period where China has seen unprecedented growth, since 1985. Much of the focus by policy makers in the past seven years has been on having an inward-focused, consumption-led economy, which has resulted in the rise of mobile social and payment platforms such as WeChat and Alipay in the past three years, to catalyse this,” observes Modise.

One could argue that China’s high savings rate was a function of the fact that they didn’t have anything to spend it on. As the Chinese economy opens to the global economy, we find that they are just like everyone else – they love to spend, and especially on aspirational brands. Modise says the big trend for the youth is to take photographs of their shopping and post it on social media.

This massive buying power leads to numbers that are impossible to even comprehend. China’s digital payment market is 50 times bigger than America’s and consumers spent $5.5 trillion in 2016 through payment platforms. What the Chinese have done, is to make it really easy to spend, which removes them even further from the reality of their money.

“Losing a wallet filled with cash and credit cards in China would be no problem, but losing your mobile phone is. It was astounding to observe people scanning QR codes to pay for something as cheap as jian bing and tea from a street vendor, or something as expensive as a large antique bookshelf in the M50 Art district. I remember going into a corner shop to buy a maki hand roll after 9 pm and to my surprise, the teller did not have change for CNY 100. About 98% of my purchases whilst in Shanghai where paid for in cash, as it was really hard to find places where my Visa debit card worked. If you don’t have a Chinese bank card that you can link to a WeChat Wallet or Alipay, you cannot pay using these very convenient methods. That’s the reality – that China has to be one of the countries with the most advanced and sophisticated payment ecosystem at the moment,” notes Modise.

Safeguards to protect yourself

Modise’s experiences show that if you give us stuff to spend our money on and make it really easy to do so, we will spend. So, once we accept this basic fact, we need to put in safeguards to protect our pockets from ourselves.

Fact one: If there is money in your account you will spend it. Transfer your savings out at the beginning of the month, before you spend

Fact two: If you have a credit line, you will use it. Avoid credit as much as possible. Never take out a store card in the first place. Refuse your bank’s offer of an overdraft facility. If you do have a credit card either make it a low limit or lock it away.

Fact three: We struggle with impulse control. When going into a shopping mall a strange thing happens to our brain. It somehow switches off and we find ourselves leaving with items we never intended buying. Switch your brain back on by making a pact that if you want to buy something  that was not on your list, wait a day and then return to make the purchase

Fact four: Online shopping can be addictive. Carl Richards, author of The Behavior Gap, has created his own “cooling off” period for online shopping. He puts the item in the basket and then waits 72 hours. If he still wants it, he goes back and orders it.

This article first appeared in City Press.

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