Wang Jianping and his wife, Shue, are a relatively affluent Chinese couple, with an annual household income of $16,000 — more than double the national average for urban families.
They own a three-bedroom apartment. They paid for their son to study electrical engineering at Tsinghua University, in Beijing. And they are prodigious savers, with $50,000 in a local state-run bank.
But like many other Chinese families, the Wangs feel pressed. They do not own a car, and they rarely go shopping or out to eat. That’s because the value of their nest egg is shrinking.
Under an economic system that favors state-run banks and companies over wage earners, the government keeps the interest rate on savings accounts so artificially low that it cannot keep pace with China’s rising inflation. At the same time, other factors in which the government plays a role — a weak social safety net, depressed wages and soaring home prices — create a hoarding impulse that compels many people to keep saving anyway.
Indeed, economists say this nation’s decade of remarkable economic growth, led by exports and government investment in big projects like China’s high-speed rail network, has to a great extent been underwritten by the household savings of the country’s 1.3 billion people.
This system depends on the transfer of wealth from Chinese households to state-run banks, government-backed corporations and the affluent few who are well-connected enough to benefit from the arrangement. Meanwhile, striving middle-class families like the Wangs are unable to enjoy the full fruits of China’s economic miracle.
“This is the foundation of the whole system,” said Carl Walter, a former J.P. Morgan executive who is co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”
“The banks make loans to who the Communist Party tells them to,” Walter said. “So they punish the household savers in favor of the state-owned companies.”
Economists say that for China to continue serving as one of the world’s few engines of economic growth, it will need to cultivate a consumer class that buys more of the world’s products and services and shares more fully in the nation’s wealth.
But rather than rising, China’s consumer spending has actually plummeted in the last decade as a portion of the overall economy, to about 35 percent of gross domestic product, from about 54 percent. That figure is by far the lowest percentage for any big economy anywhere in the world.
Unless China starts giving its own people more spending power, some experts warn, the nation could gradually slip into the slow-growth malaise that now afflicts the U.S., Europe and Japan.