China: GDP rising, public spending too?
Indication that China's economy is close to second largest in the world came today with the release of Japan's growth figures for the second quarter.
Where's all the money going, Sohu economics forum member BRY seems to ask in this post from last week, “Why do Chinese always save so much?”.
In China, while the universal health insurance system now being implemented has helped alleviate the problem of price gouging in health care, unless you can keep from developing any major sickness during your lifetime, the excess costs beyond coverage are enough leave a family with nothing to its name, or even in debt.
In China, university tuition has risen to 25 times what it costs less than 20 years ago, yet during this same period of time the average income for urban and semi-rural residents has only quadrupled, meaning the cost of university education is increasing 10 times faster than these residents' income. For four years of undergraduate study, a person will at the very least have to spend RMB 28,000, equivalent to twenty years of net income for a farmer from a poverty-stricken area. This doesn't take into account costs for other costs such as food, clothing or health care.
Socialist countries with planned economies such as Mongolia, North Korea and Cuba each implement a retirement pension system based on national insurance, a social insurance system made into a national system through each country's constitution; retirement costs are entirely provided by the state, without the recipient having to pay pension fees. Presently in China, government employers use a national insurance model old age pension system, and corporations utilize a publicly funded private insurance model old age pension system. Farmers and unemployed urban and rural residents (including those without fixed employment), who comprise the majority of the country's population, either live left out of the old age social pension system or else shoulder the 20% of their salary in fees themselves.
If these three mountains aren't reason enough to explain why Chinese tend to save so much, then you can add the house. Current housing prices are elevated to the point that a middle income family has the choice of either spending more than half their life savings, or remaining slaves to a mortgage for the duration of their lives.
The reason Chinese always save so much is because everything that gets squeezed out of today gets spent on tomorrow. Chinese aren't money hoarders, rather it's that they're insuring themselves, and trying to leave something for their children. With the social insurance system as lacking as it is today, the only option Chinese have is to struggle selflessly in order to provide comfort and stability for their families and the future generation.
Source: global voices
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