Chinese consumption raises a red flag
What if growth in wages slows down, and the Chinese millennials, with an their assortment of credit cards, aren’t able to pay their mounting debts? A threatening consumer credit crunch in China could have global fallout …
Andy, a tour guide who led a group of us on a business tour of Shenzhen last month, seemed almost proud of the fact that he was juggling eight personal credit cards. "The government encourages us to spend," he said. He seemed unfazed by this state of affairs, apparently unaware of any potential downside. Nor is he alone. Tom Wang, a 26-year-old university graduate told a similar story to the Financial Times (FT) a few months ago. Wang said he’d used ¥60,000 on four credit cards to make up the gap between his starting salary of ¥3,000 and a lifestyle that extended to buying the newest smartphones. Before long, his debt was ¥130,000 and his monthly repayments were ¥1,500. It is this trend that former Goldman Sachs economist Jim O’Neill has flagged as one of the most critical shifts in global economic tectonics. "The world is more dependent on the Chinese consumer than anything … Chinese [government] policy is to promote the consumer," O’Neill said at last week’s Discovery Leadership S...
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