By Chris Hogg
BBC News, Shanghai

The Chinese government is asking its people to spend a little more and save a little less to help get the country through the global economic downturn.

The Chinese are prolific savers, putting away at least 30% of their disposable income each month.

For many Chinese it’s a form of "self-insurance". The money is saved in case it is needed to meet medical bills, the costs of education or in case someone in the family loses their job.

China does not have the same kind of welfare systems you see in the US, or in Europe or Japan, so there is not much of a "safety net" if the family falls on hard times.

How difficult then is it going to be to persuade Chinese people to break the savings habit

‘Face thing’

Colin Yu is a freelance language teacher in Shanghai. He is 28 and earns about $700 (£425) each month.

That makes him the major breadwinner in his family. His parents earn less than $10 a day between them. His mother works in a factory, his father is a security guard in a food market.

Colin has to save more than 50% of his earnings because he has to send money back to his parents in their village about 200km (124 miles) from Shanghai.

"It’s hard to watch your close relatives when they’re in trouble and you can’t really help them much"

Colin Yu

"My mother makes very little money, neither does my father," he says. "Their jobs are not very stable. The problem is my job isn’t stable either."

The cost of the bus fare home to Yuyao, the village where they live, means that Colin can not afford to make the journey too often.

On a recent trip home, though, he showed me the new house they had built.

From the outside it looks impressive, two stories high, each storey with three rooms, but inside it is unfinished, even though it was completed three years ago. There is barely any furniture.

"We borrowed a lot of money to build it, from friends, from neighbours and other villagers," he says. "The problem is at the moment we have run out of money."

Colin has reached the age that most Chinese believe is most suitable for marriage, so the family decided they needed to put what meagre savings they had into the construction of a new house.

"If we had kept on living in a shabby house, people would have said ‘they are not a very good family’," he explains. "So it’s kind of a face thing, we had to build it so others would respect us."

In China, there are far more boys born each year than girls because cheaper ultrasound scans available in private clinics have made it easier to choose the sex of your baby.

That sex imbalance means the odds are stacked against someone like Colin when it comes to finding a wife.

His family, like many others, needs to save as much as it can so he can compete with others when looking for a partner.

Agonising choice

Over dinner Colin’s mother explains that she and her husband spend half their income on food.

The rest goes on other necessities like clothing or utility bills. What little is left over they save.

The government has introduced schemes to subsidise the cost of buying household appliances by 13%. There are other schemes that cut the purchase tax on cars.

Consumers in the countryside were the first to benefit from these promotions that are designed to boost domestic demand, to help the country get through the downturn.

For the Yu family though, they do not work as an incentive to spend because they just do not have the money.

"The first thing I would like to buy is a washing machine," says Colin. "It’s very hard to do the laundry in the winter. My mother always has blisters when it’s cold. Later on I would buy my parents a fridge and some air conditioning units, but we just don’t have any spare cash."

The idea that poorer families in rural areas like the Yu’s can be persuaded to spend more cash to help China survive the global downturn is problematic.

Their priority at the moment, having recently paid off their relatives and friends for their house loans, is to build up their savings again.

They need to save a lump sum to pay to the government so that Colin’s mother and father get a pension when they retire.

They need to save for future medical bills too.

The family made the agonising decision a few months ago not to borrow money to pay for an operation after Colin’s grandmother fell and broke both her hips.

The doctor said it would be hard for her to endure an operation and she would probably suffer a lot. She died a month later.

"It’s hard to watch your close relatives when they’re in trouble and you can’t really help them much," Colin says.

The fear that one day they too might have to make that kind of difficult choice, is probably what drives most Chinese to save such a high proportion of their disposable income.

An illness can rob you of your ability to earn, and cripple you and your family with medical bills.

If China’s leaders want families to spend more, they need to help them to worry less.

Discount schemes on home appliances or cars are persuading some to head for the shops.

Real and substantial changes to the country’s welfare system would make much more of a difference but that is much more expensive and much much harder to get right.</p

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