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Less Savings, More Debt: How Chinese Manage Money American-Style, in 17 Charts


Less Savings, More Debt: How Chinese Manage Money American-Style, in 17 Charts

China has long been a nation of savers.

For decades, its citizens socked away much more of their incomes than Americans do. The pool of capital that was created powered China’s economic rise.

Banks used their bulging deposits to fund factories and roads. The government became a key global creditor, bankrolling infrastructure overseas and buying up more than $1 trillion in U.S. Treasury bonds.

The savings also fueled tensions with other countries. Western leaders said China was discouraging spending to tilt the global economy in its favor.

Now, 40 years into the greatest accumulation of money the world has ever seen, the pattern is reversing. The impact will be felt world-wide, in ways good and bad.

Behind the change: Chinese citizens are saving less and borrowing more as they reach middle-income levels.

While Chinese families still sock away more than Americans—about five times more income—their overall savings rate is declining.

In 2010, average Chinese workers saved 39 cents of every dollar of income. Today, it is 33 cents. Many young Chinese save nothing at all.

After peaking in 2010, China’s savings rate has fallen in six of the past eight years. It is forecast to fall more.

China’s savings are also increasingly offset by soaring personal debt—something that wasn’t nearly as true a decade ago—as China’s freshly minted middle class borrows, American-style, to afford new cars and international travel.

For every dollar of gross domestic product generated in China last year, its households owed 54 cents, according to the International Monetary Fund. Households will owe 68 cents per dollar of GDP by 2024. U.S. consumer debt is 78 cents per dollar.

Household debt has surged in China, while it has backed off in the U.S.

A tail-off in savings was bound to happen as China grew richer and its economic boom ebbed. This shift toward saving less and spending more could help correct imbalances in the global economy that built up in years when Americans did much of the world’s buying, and China did much of its saving and lending. Consumer spending creates new growth momentum for China, and some foreign companies.

China says consumer spending is a sustainable economic driver, but it has a way to go to catch up to U.S. levels. Household expenditure, as a percent of GDP.

But it also means China will have less firepower to buy U.S. Treasurys, which helped keep U.S. interest rates low, and to use its savings to peddle influence abroad through programs like its Belt and Road development initiative.

It will also translate into less financial flexibility for Beijing—and Chinese households—as the country grapples with a slowing economy. With their financial cushions shrinking, Chinese families may find it harder to navigate losses from the U.S.-China trade war on top of the looming costs of a shrinking workforce and fast-aging population.

Many people fear China will grow old before it grows rich—and without enough savings.

China still has plenty of wealth squirreled away. Its urban households control assets valued at 429 trillion yuan, or some $61 trillion.

Many Chinese families viewed this saving as a necessity. China lacked a reliable social-safety net for education, health care and retirement. People felt they had to set aside more for rainy days.

China’s one-child policy may be the primary reason households save, as parents had fewer children to spend on and more need to save for retirement. Savings also swelled when China threw away early Communist-era protections, including free housing.

The impact of China’s high household-savings rate is broad and far-reaching: Every yuan saved is one not spent but available for a state-run bank. Much of that money, along with corporate deposits, gets turned into loans. Household bank balances have soared more than 1000% since 2000, faster than the nearly 800% expansion in GDP during that period—a wealth accumulation unmatched by any country in modern times.

Deposits claimed by China’s households have risen more than 1000% since 2000, though the pace has slowed with China’s economy.

Industrial and Commercial Bank of China Ltd.

and three other Beijing-headquartered banks leapt into the top four spots globally, based on capital.

The funds financed government priorities, like an 18,000-mile network of trains that can transport passengers at 200 miles an hour. Depositor savings help explain how Beijing has lifted military spending annually for around two decades, to $170 billion.

China built up $3.1 trillion in foreign-exchange reserves, including $1.12 trillion in the form of U.S. Treasurys.

Savings must be invested somewhere. Some of China’s flow into U.S. Treasurys, which keeps the yuan from rising and suppresses U.S. interest rates.

Chinese saving also helped the country write infrastructure loans. Here is China’s infrastructure spending in recent years vs. the U.S.

As China’s pool of savings grew, debate over how to use it increased. After all, savings represent money not spent buying what the world hopes to sell.

Because deposits earn so little in China’s banks, their loans can be priced cheap, allowing the government to direct its state-run banks to lend to government-run domestic companies on favorable terms to expand operations.

China imports less from more than 150 countries than it exports to them, a trade surplus of $450 billion last year. This gives Chinese savings a boost but the trade imbalance has been a recurring frustration for other nations through history—and the central thrust of U.S. policy with China during President Trump’s term.

Echoing recommendations of foreign governments and economists, Beijing policy makers began encouraging citizens to save less and spend more. Many felt China’s savings glut had become a risk, making it too easy for China to grow through constructing projects that could saddle it with white elephants.

If households could be encouraged to spend more confidently, their money might spur creation of small businesses and other foundations of a sustainable consumer economy, authorities said.

Results have included a rise in imports by China and growth in international travel by its citizens, trends economists say could soon result in more money leaving the country than entering it. In a harbinger of this looming deficit in China’s current account, its foreign-exchange reserves and holdings of U.S. Treasurys peaked more than five years ago.

China’s growth has become dependent on new debt. A ratio called credit intensity of growth shows how much yuan in new debt is required to generate an extra yuan of output.

A major concern for China is that its transition into a consumer-led economy is being fueled by borrowing, not just by drawing down savings.

Mortgages are the primary culprit. Most families own two or more apartments, one to live in and the other as an investment—much of it fueled by credit.

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For middle-income Chinese, nearly 22 cents of every earned dollar is earmarked to cover mortgages. Lower-income Chinese are on the hook for 41 cents, up 50% in three years and essentially all their savings plus some.

“There has been a fundamental shift in Chinese families’ savings pattern, as higher home prices and rental costs have pushed up households’ debt levels,” said

Wei Hongxu,

an economist at Anbound, a Beijing think tank.

Mortgages account for a rising share of household income in China. The strain is especially evident among the poorest.

Personal loans in the past were used mostly to buy property, but these days more Chinese are tapping short-term consumer credit as a lifestyle convenience the way Americans use credit cards, and, at almost 24% growth annually in recent years, such borrowing has far outpaced incomes.

While the largest portion of Chinese household debt is real estate, other categories are increasing.

Against that backdrop, China’s savings profile looks more like America’s—and less robust than widely considered.

The wealthiest 10% of households have 80% of the savings, while 40% save nothing. Debts equal 13 times income for the bottom third of Chinese wage earners—all while Chinese lag behind Americans in earnings and wealth by big margins.

The average Chinese household controls 1.62 million yuan in real estate and other assets, or around $230,000, according to the Survey and Research Center for China Household Finance at Chengdu’s Southwestern University of Finance and Economics.

American household net worth is around $692,100, according to the Federal Reserve Board. Only about a third of U.S. household assets are real estate, while most Chinese wealth is.

Chinese and U.S. households save differently. Chinese assets are predominantly in real estate, while investment portfolios of U.S. households are more diversified.

China is also seeing a shift in the way people who do save choose to do so, adding risks. Instead of putting money in banks, more people are parking cash with app-based financial firms or with what is known as shadow-banking funds promising higher payouts.

These app-based firms typically turn deposits into short-term loans for already indebted companies or cash-strapped consumers shopping for clothes and smartphones. So instead of the people’s money being deposited in government-insured financial institutions that lend to moneymaking businesses, individuals increasingly own unsecured IOUs.

At least half of China’s population now has an account with Tianhong Yu’e Bao, an app-based fund owned by an affiliate of

Alibaba Group Holding Ltd.

, or similar investments through

Tencent Holdings Ltd.

’s WeChat.

China’s households are increasingly depositing money in nonbank financial companies, though growth has tapered off as yields have fallen.

Ant Financial’s Tianhong Yu’e Bao money-market fund illustrates how Chinese consumers trust nonbank firms with deposits even if enthusiasm for the six-year-old fund has cooled.

Rapidly delivered loans promoted through internet giants like Alibaba and Tencent are replacing mortgages as the fastest-growing source of individual indebtedness, according to the National Institute of Finance and Development. The Beijing-based think tank says short-term consumer lending continues to advance 20% annually.

In a sign of how leveraged some Chinese have become, four-fifths of one firm’s loans are collateralized with used cars, according to one study. China’s central bank tracked a 19% rise in credit-card delinquencies last year, to 79 billion yuan and 10 times the 2010 level.

Default rates for some lenders have surpassed 20% on personal loans delivered online.


Yirendai Ltd.

is one of the Chinese consumer-lending industry’s few publicly traded firms. It shows rising delinquencies.

Yet just when China is becoming wealthy enough to become a nation of consumers, income growth is threatened by a working-age population on track to shrink and as older people begin to tap into their savings for retirement.

China’s aging population is forecast as a major drain on the country’s savings.

Now, China’s slowdown threatens to accelerate the trends behind the country’s falling savings rate, as income and job growth slow.

Write to James T. Areddy at


As China’s population saves less, what do you think the impact will be? Join the conversation below.

Corrections & Amplifications
A chart on China holdings of U.S. Treasurys is denominated in dollars. The chart was incorrectly denominated in yuan in an earlier version of this article. (10/30/19)

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