Why Chinese People Are Shaking Their Heads at the U.S. Financial Crisis
“My parents paid for their house with cash,” a friend recently told me. By house she actually meant apartment which is what most Chinese people live in. She also said that her aunts, uncles, and cousins had also paid for their houses with cash.
“No one had to borrow money from the bank,” she explained. “They all had a lot of cash on hand.” While mortgages and credit cards are becoming more popular in China, there is still a traditional principle in place which dictates that one should be able to pay with cash for something before they really need to buy it. Many Chinese people are able to pay for their houses with cash because in my observation, they are some of the best ‘penny pinchers’ in the world. And by that I am not suggesting that they are stingy. Years of hardship and an uncertain future have forced millions of Chinese people to survive on the bare necessities. Despite the fact that China’s outlook is much brighter there are many people, especially in the older generation, that still save much more than they spend.
“My parents don’t have a budget,” my friend said. “They just save money.” Of course, saving is still a good idea in China given the fact that the majority of the population has little access to health insurance or social security.
This week, I can only imagine that many in China are shaking their heads as they observe the financial crisis in the United States. Most people that I talk to here have no desire to obtain credit because of the dangers. They understand what can happen when people make risky and simply bad financial decisions as President Bush talked about last night in his television address.
Today, Reuters is reporting that Chinese economic regulators have ordered domestic banks in China to stop lending money to U.S. banks “to prevent possible losses.” I have a feeling that not only will the Chinese government take further actions to minimize losses in this situation but they will also take a hard long look at the credit situation in China and do everything possible to prevent a meltdown like this domestically in the future.