Global meltdown: China's a cool place to stay

On the whole, mainland Chinese people just don’t do debt.

During this global meltdown I visited a Chinese friend’s Korean restaurant the other day in Nanhui, the somewhat rural end of Shanghai, which is an hour and a half commute from where I live. As I walked through the door just before lunch rush hour I expected him to be bustling about. He was fast asleep in a hammock chair, toes pointed to the ceiling.

“Crisis? What crisis?” as the Supertramp album asks.

I was not surprised to see Davy having a snooze. Davy then woke up and sleepily offered to cook a meal for me for free as we had not seen each other in months. We went outside so he could proudly show me his new Buick station wagon, glinting silvery in the sun. He paid for it cash. It took him years to be able to save up the money. He runs a small, humble restaurant (the food is yummy) but he refused to get a loan.

That is just one of many snapshots I could take of Chinese in Shanghai. Few have much material stuff, but not many stress. (The very few who do have a lot of stuff have that selfsame restless, soulless, arrogant look I see on many wealthy Western faces.)

Generally, mainland Chinese people just don’t do debt. Less is more.

My Chinese friend Aussie Andy put it quite simply. “I don’t have debt, my family doesn’t have debt and my friends don’t have debt. This is Chinese culture; nobody wants debt.”

One reason for the global financial crisis is the crushing debt people owe. The average Briton in 2006 owed over three thousand pounds. It has increased since then. Of course, that does not mean everyone owes that kind of money in Britain. Those who owe, owe, oohh! are the “debt-heads” as Linda Keenan calls all credit card users who buckle and twist that frightening piece of plastic in every direction except financial freedom.

The debt-heads in Britain – and in any of the numerous credit card-mad countries – are usually those people in their thirties and early forties, who owe more, while others owe little or nothing, thus skewing the statistical average of just over three thousand pounds per capita. By and large, people in their early twenties just haven’t got there yet (are we there yet?!?), and people in their fifties and older have, generally speaking, either learned their lesson or were too wise, “old school” in their thinking to get into buckets of bad debt.

So the real debt-heads on average owe figures like six to seven thousand pounds, roughly eighty thousand rands of the deep, soft and smelly, with interest compounding monthly. And with no equity.

I realise I am probably not saying much that is new to the average Thought Leadership reader. Let me put the words in your mouth, “Rod, stop insulting our intelligence, get on with your point!” To which I reply, “The disciplined attitude towards money of the mainland Chinese people is something that the Western, impulse-purchase mad world needs to take a long, long look at”.

In Shanghai, the average Chinese will not spend four RMB (five or so rand) on a subway when they can take a bus for two RMB, even though it takes twice as long or more to get to their destination via bus. I wouldn’t dream of the bus option because of my Western conditioning, but who’s the smarter guy? Think carefully before you answer.

Chinese people know how to get two pennies out of one. Western people don’t bother to pick up a dropped penny.

The understanding of plastic here in China is that it carries store goods that were bought cash. A Westerner’s understanding of plastic is to wake up in the middle of the night from a nightmare about Count Vladimir MasterCard sucking the life blood out of him and his family.

However, the younger generation in Shanghai is a slight cause for concern. A twenty-year-old friend of mine managed to get a credit card and got herself two thousand RMB in the red by splashing out on one necklace. Mom immediately took her credit card away. Wise mom.

My Chinese friend Andy went on to say: “But I think the world economic crisis will not affect China much, because the government has great power in controlling China’s economy. As you know, China used to be communist. The government took most factories and companies from being capitalistic structures. Nowadays, the government still owns a large amount of huge enterprises. Those enterprises control the Chinese stock market”.

Let me comment on what Andy said, as he has perhaps not entirely made his point clear, due to his inability to express himself better in English (better than my Chinese) or perhaps he just wanted to get on with wolfing down the marvellous spread of meat pies, mash potato and Bistro gravy Marion had made for us that night (all bought cash, not on a credit card).

In China, the government issues policies to banks. There are stringent rules on creating bank loans. Marion and I would have to go to great lengths to secure an overdraft and I don’t even know if we could get one … and what on earth – and the entire solar system – for?

There is micro-lending to small businesses in China, but that is good debt, used to create business and employment. It is not bad debt, whereas the cyberspace possibilities of a piece of plastic issued by MasterCard are the equivalent to Dante’s Inferno, with no purgatory, my Faustian friend. Your soul is priceless.

Micro-lending is booming cautiously in China, and is responsibly monitored. One of the two local newspapers, China Daily, in an analysis of micro-lending, reported, “latest figures show that [ SBE’s ] overdue loans account for 0.63% of their total outstanding loans”.

0.63%!!

China – for us – has turned out to be a great place to stay. But oh, if you are thinking of moving here, perhaps forget about the cars, the HP purchases to kit out your new home, having four to forty credit cards and store cards, the designer kitchen … you get my drift. We don’t have much here in China, and no car (not needed with the superb public transport system), but we spend less than half our income every month, and have no debt.

We have – at long, long last – learned well the adage that “less” is definitely “more”.

Not to say you can’t have all that self-consuming consumerist “stuff” here, but then you might as well stay where you are.