CKGSB Knowledge - China Business and Economy

SAVING IS THE NEW SPENDING

Gu Anzhong looks wistful as he stares at a sleek BMW sedan at China’s first-ever import expo in Shanghai. The 52-year old management consultant had pined for the same model—with a price approaching RMB 1 million ($144,000)—as a second car to go with the purchase of a new villa on the outskirts of Shanghai, but rising bills scotched the plan.

“Cash flow is tighter since my family bought our second home. Two mortgages mean we have to be more careful,” says Gu. “It’s fine. Frugality never hurt anybody.”

Gu is hardly alone when it comes to watching his spending. Across the country, the talk is about cutting back in big ways and small—from cooking at home instead of eating out, to getting around by bicycle rather than taxis.

At a busy KFC restaurant near the expo, for instance, Yang Jianhong says he used to eat fast food several times a week, but this year has cut down to once or twice per month. “I pack my own lunch now to save money, like many of my colleagues,” says the 28-year old graphics designer.

After years of enjoying the fruits of a booming economy and sharply rising disposable income, life for many of China’s higher earners is getting harder. Amid mounting debt levels and economic headwinds, urban middle-class consumers

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