Young Chinese Spend Like Americans—And Take on Worrisome Debt

Chinese under 30 aren’t savers like previous generations. That’s helping diversify the economy, but adding to household debt

Western economists have long said that China needed a base of American-style consumers to bring the country sustained economic growth. Now China has one: Its young people.

While previous generations were frugal savers—a product of their years growing up in a turbulent economy with a weak social safety net—the more than 330 million people born in China between 1990 and 2009 behave much more like Americans, spending avidly on gadgets, entertainment and travel.

The freewheeling consumption is helping China diversify its economy at a crucial time. Beijing has relied on exports and infrastructure-building to drive growth for decades, but recent signs point to a slowdown amid tariffs from the Trump administration. The new spending patterns have benefited Alibaba Group Holding Ltd. ,Tencent Holdings Ltd. and other tech companies, whose rapid growth has helped energize China’s economy.

Yet all this consumption has a downside. Household debt levels have risen rapidly over the past several years, with many young Chinese borrowing money for their purchases.

High levels of corporate and government debt are already longstanding concerns for Beijing. As household debt climbs, some economists worry the country’s debt burdens overall could become unmanageable and weigh on China’s growth.

Yang Huixuan, 22, who graduated from college this year, has turned to online loans to pay for meals out, cosmetics and clothes.

To avoid problems down the road, some economists say, household borrowing will have to slow to more sustainable levels, adding another headwind to China’s economy. In a worst-case scenario, they say, the combination of high government, corporate and consumer debt could exacerbate the economic slowdown and trigger a broader loss of confidence in China.

Liu Biting, 25 years old, says she spends all of her paycheck each month: 10,000 yuan ($1,400) a month from her marketing job in Shanghai. About a third goes to rent, and the rest on food, her sewing hobby, going out, music and other products. So far, she has avoided falling into debt.

Until recently, one of her monthly expenses was a clothing rental subscription that cost $70 a month. She liked it, she says, because she could “try out a lot of strange clothes.” She discovers makeup brands on a WeChat account she follows that recommends products, many of them local.

“For my parents’ generation, for them to get a decent job, a stable job, is good enough—and what they do is they save money, they buy houses and they raise kids,” she says. “We see money as a thing to be spent.”

Her parents repeatedly ask her how much she has saved in her three years of working. “I say, ‘I’m sorry, probably nothing.’ All my friends are like this. We have no savings and we don’t really care about it.”

Liu Biting shopping in Shanghai.

Young people have “become the main consumption power” in China, Alibaba chief executive Daniel Zhang told reporters in November. People born after 1990 made up nearly half the customers during the latest “Singles Day” annual shopping event, when Alibaba sold roughly $30.8 billion of merchandise in 24 hours.

New GenerationsChina’s population by age groupSource: National Bureau of StatisticsNote: From the 2010 Population Census, most recentyear available.
Under 1010-1920-2930-3940-4950-5960-6970-7980-8990 and older0 million100200

Almost a quarter of car buyers in China are under 30, and that figure is expected to rise to roughly 60% by 2025, says Zhou Ya, head of market research and customer intelligence for Volkswagen GroupChina. She says Volkswagen sees Chinese customers under 30 as crucial to its future in the country. The company is rolling out three entry-level models geared toward young drivers in China’s less developed cities this quarter.

The spending is also helping power local brands including Heytea, an upscale tea salon, and Starbucks competitor Luckin Coffee, which raised about $571 million after going public earlier this year.

Chinese youths are especially more willing to pay for travel. A report last year by Mastercard and Ctrip.com, China’s biggest online travel website, found that about one-third of China’s outbound tourists who booked with Ctrip were born after 1990, and they spend more on a single trip than those born in the 1980s.

Short-term loans from online lenders such as Ant Financial Services Group are helping fuel the spending. Ant Financial charges rates up to nearly 16% on an annualized basis, depending on the credit profile of the borrower. A 2018 survey in China by Rong360, a loan recommendation website, found that around half of respondents who took out consumer loans were born after 1990.

Wang Xinyu, 24, has racked up about $11,200 in debt spread over six credit cards.

Most had borrowed from multiple lending platforms, the survey found, and nearly a third took out short-term loans to repay other debts. Nearly half of them had missed payments.

One of the most popular ways to borrow is a Huabei account, a revolving credit line embedded in China’s Alipay mobile payments network. Huabei has extended loans in excess of 1 trillion yuan, or more than $140 billion, since its launch in April 2015, a person familiar with the matter said. Ant Financial, which owns Alipay, declined to disclose any figures related to Huabei.

Going MobilePercentage of users of mobile payments inChina by ageSource: Payment & Clearing Association of China
54.42%27.613.8521-3031-4041-5051 and older

China’s former central banker Zhou Xiaochuan warned last November that the rise of fintech, while helping develop the consumer credit market, may “excessively induce” the younger generation to spend beyond its means.

Yang Huixuan, 22, who graduated from college this year and works in communications for a soccer club in Nanjing, says she turned to Huabei while in school. She says she often borrowed around $100 a month to pay for meals out, cosmetics and clothes that she couldn’t cover with the roughly $215 stipend she got every month from her parents. She relied on Huabei’s installment payment function to afford bigger items like cameras and smartphones.

Huabei is “truly addictive,” says Ms. Yang, “It gives me an illusion that I’m not really spending my own money.” Ms. Yang says she’s scaling back some now because of higher living costs and because she’s reluctant to keep turning to her father for money.

Yang Huixuan shopping on her phone in her dorm room in Nanjing and looking for deliveries in the mail room.

An Ant spokesman says Huabei encourages its users to spend responsibly, and gives users the option to set monthly limits to help monitor their own spending.

Easy credit has come from a wave of online micro-lenders and peer-to-peer lenders, which proliferated several years ago amid loose regulations. Some charged exorbitantly high interest rates.

Authorities have halted issuing licenses to new online lenders since late 2017, and tightened oversight to ensure interest rates on some loans are capped at an annual percentage rate of 36%. As of July, fewer than 800 peer-to-peer lenders remained in operation, from more than 2,600 in early 2016, according to industry website wdzj.com.

Borrowing BingeShort-term borrowing makes up a rising proportion of household debt in China.Source: WindNote: 1 trillion yuan = $140 billion
.trillion yuanShort-term loans forbusiness purposesMortgages, auto loansand other longer-termdebtShort-term consumerloans2004’06’08’10’12’14’16’1801020304050

The average consumer spending of Chinese credit-card holders between ages 21 and 30 in 2016 was around $8,820, 39% higher than their average credit line of $6,360, according to data from Oliver Wyman, a New York-based consulting firm. Consumers can spend more than their credit limits by taking out additional loans from other channels, such as online lenders, or with subsidies from family.

Wang Xinyu, 24, says he has about $11,200 in debt spread over six credit cards, much of it accrued when he was in college and found it easy to swipe cards to pay for everyday expenses.

Mr. Wang, who earns about $600 a month working at a Beijing bookstore, says he now puts his entire salary toward paying down his debt. He still relies on credit cards to pay for food and rent, and sometimes uses one credit card to pay back another.

Wang Xinyu at work and shopping for groceries in Beijing.

Young people in China are being “pushed by the tide of the era” in their reliance on easy credit to pay for things, he says.

JPMorgan estimates China’s ratio of household debt to gross domestic product will climb to 61% by 2020. That’s up from 26% in 2010 and higher than current levels in Italy and Greece.

The level in the U.S. is about 76%, after falling from 98% in 2006, according to the International Monetary Fund.

By another measure—the ratio of household debt to disposable income—China appears to have already surpassed the U.S. Its ratio reached 117.2% in 2018, up from 42.7% in 2008, according to calculations by Lei Ning, a researcher at the Institute for Advanced Research at Shanghai University of Finance and Economics. The U.S. peaked at 135% in 2007 and dropped to 101% in 2018.

China has passed the U.S. in one measure of debt, and is catching up in another.

Household debt to disposable income

Household debt to gross domestic product

125

%

125

%

U.S.

100

100

U.S.

75

75

China

50

50

China

25

25

0

0

2008

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

2008

’09

’10

’11

’12

’13

’14

’15

’16

’17

Sources: Institute for Advanced Research, Shanghai University of Finance and Economics (disposable income); International Monetary Fund (GDP)

Some economists remain unconcerned by the rise in household debt, noting that default rates with consumer loans appear relatively low.

One fear, others say, is that China’s slowdown could be exacerbated if young Chinese lose their jobs or see their wages cut, and have to sharply curtail spending. If they don’t and continue falling into further debt, they could become even more vulnerable in future years.

As the U.S. saw in the 2008 financial crisis, default rates can shoot up rapidly when growth slows.

This generation “has no idea what a rainy day feels like,” said Dong Tao, an economist at Credit Suisse in Hong Kong. “Any consumer credit boom will always be tested—no exception,” he says.

He points to mortgage debt as a deepening problem across China’s economy, including for young people. Mortgage debt outstanding grew from $1.1 trillion in the fourth quarter of 2012 to $3.9 trillion as of June.

Mortgages accounted for about a third of China’s medium- to long-term loans, up from 20% in 2012, according to the People’s Bank of China.

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How will young consumers’ spending affect China’s economy? Join the discussion below.

Parents often help young Chinese to buy a home, which Mr. Tao sees as a danger, with multiple generations now required to afford a single property. A similar phenomenon occurred in Japan in the 1980s, he says, sometimes with three generations helping to pay for a mortgage—a sign the market was overheated. Japan’s economy eventually entered a protracted slowdown as equity and real-estate asset prices corrected.

China’s slowing job growth adds to the challenge. This year, more than 8.3 million college students are expected to graduate, compared with around six million a decade ago and only 165,000 in 1978. Yet some of China’s most desirable employers, like e-commerce company JD.com Inc., have cut jobs as growth ebbs. Last year, a record 2.9 million individuals took the entrance exam for graduate school.

Lu Yu shopping in Suzhou and pointing to his apartment.

Lu Yu, a 26-year-old who works in human resources for the German technology company Robert Bosch GmbH in Shanghai, says he feels more economic pressure now, including a need to help care for his parents. He is living with them at home while an apartment he recently bought—with his parents’ help—is undergoing renovations.

Still, he says he “can’t do mundane jobs that require me to follow the rules” and would like to keep spending on products “that help improve my living environment, like high-quality towels and aromatherapy products.” While his parents are reluctant to spend on fine dining and travel, he aims to travel twice a year, including recent trips to Japan, Cambodia and Thailand.

“For me, if the money isn’t spent on enriching your spirit and bringing you happiness, then what’s the point? Are we supposed to live so that we can save money?”

Transcript of Richard Spencer’s Speech at Texas A&M

I’m just curious; I want to do a bit of a demographic study. If you’re a member of the media, please raise your hand. Okay, okay, put your hand own, please. That’s a very offensive gesture. Shut it down. We knew you were the lying media, but for God’s sake, that’s out of hand.

.. I actually did grow up in Texas, so I am proud to say, the Alamo did nothing wrong.

.. It is certainly the expression of the desire of a mainstream media to slander and just silence us with one thirty second footage.

.. But I think it also says something about the life of the Alt Right. We don’t allow other people to tell us what we can joke about. We don’t play by their rules. We have fun, we can be outlandish, and that is never going to stop.

.. So, the Alt Right can’t be defined by something from the past. We can’t be trapped in the past. But we also need to go forward guilt-free. We need to be high energy, we need to have fun, we need to be a little outlandish, we need to trigger the world. So all I would say is: keep it up. I love you all.

.. So what is the Alt Right? When I first started using that term, it was about mid-2008, and at that point, I think the Alt Right was fairly, you could say, negative in its meaning. We didn’t quite know exactly what it was. I knew that something was profoundly wrong with mainstream conservatism. That was evident enough with the George W. Bush administration, with the neoconservatives disastrous wars in Iraq and so on, and with the rest of the mainstream Right offering no answers, the religious Right, all that kind of stuff. I knew that we had to have a new starting point. I also knew that we needed to — this wasn’t a matter just of tweaking the Right, as it is — this was really the matter of a new beginning. Of a new starting point for conservatism in America.

You can actually look at the starting point of the conservative movement, and they talk about global capitalism, and free markets, and the Constitution, and vague Christian values of some sort. But they never ask that question of “Who are we?” They never ask that question of identity. They probably assumed it. They probably assumed a white America, a European America, but they never really asked about it and they were never really conscious of it.

.. the conservative movement became, in its way, a mirror reflection, a photographic negative, of the Soviet Union. It became an ideological nation, it became a nation based on abstract values, like “muh freedom,” “muh democracy,” “muh bombin’ muh commies and Muslims.” It was never a place; it was never a people; it was a kind of ideology. That’s what conservatism was.

.. So, in a way, George W. Bush was the founder of the Alt Right. He was at least the founder of the term, because I knew that we had to get away from that. We had to get away from him.

..  the Alt Right evolved, it took on new meanings, and in a way it was outside of my control

.. the Alt Right has been organic, that’s why it has succeeded, precisely because other people have picked it up and they have added meanings to it, and so on.

.. After I dropped out of graduate school, I worked in what you could call the anti-war conservative movement

.. I had an idea of where that new starting place was going to be. And that new starting point was going to be identity. And that was going to be the question that we asked first.

.. So what is identity? In a way, it’s the question “who are you?” We all have many different identities. You could say that you’re a student at Texas A&M. You’re into weight-lifting. You went to a Star Trek convention. You like to wear sweatpants. These are elective identities. They say something about us, but they’re elective.

.. you could say, “I’m a citizen of the United States. I grew up somewhere. We all grew up somewhere. We’re all part of something. We all come from someplace.

.. You can go even deeper, and say, “These are my parents. This is my family.” The Left in the eighteenth century had this line “an accident of birth.” An accident of birth. No birth is an accident. There’s no historical or cosmic accident in birth. You come from somewhere. You have parents. They have parents, they have a history. So you’re part of a family. And you grew up somewhere. And you can go deeper, and you can say that you are part of an ethnicity and you are ultimately part of a race.

.. You might not like this. You might really resonate to the idea that we’re all individuals, we’re all citizens. “We’re just Americans. I don’t see color. But color sees you.

.. We all see color. And race isn’t just color. Color is, in a way, a minor aspect of race. But you’re part of something. Whether you like it or not, you’re part of a bigger extended family. You’re part of this world; you’re part of this history. And that race has a story to tell.

.. As a European, I can tell a story about people, people I never will know. Our lives stretch back to prehistory. We first started to become ourselves in the Greek and Roman world. So there’s a story that involves people you’ve never met. As a European, I can tell this story about the Greeks and the Romans, about the foundation of our civilization, about empire, about the coming of Christianity.

.. Sure, Europe’s a place. It’s a place on the map, the people, the blood and its spirit.

.. I think if I were an African-American I could tell a very different story. If I were to say what that story would be, it would be about being rooted in an African continent, and enslaved and kidnapped, and going through trials that perhaps I cannot imagine, but then becoming a people. You’re still a people. That’s the story I would tell. But it’s a different story.

.. So that’s what it means to be part of a race. A race is genetically coherent, a race is something you can study, a race is about genes and DNA, but it’s not just about genes and DNA. The most important thing about it is the people and the spirit. That’s what a race is about.

.. A lot of white people do not want to have a race. They say, “Oh, I’m just an individual. I’m just an American.” You have a race whether you like it or not. You’re part of a race whether you like it or not.

..  When a Syrian refugee — so called — whether they’re from Syria or Africa or somewhere else in the middle east, when they enter Europe, they don’t look at anyone as “Oh, look, lookee there, this man, he’s Bavarian. Oh, he’s a Bavarian Catholic. Oh look, this guy must be from Ireland. Hmm, interesting. He’s Italian.” No, they don’t see that at all. They see us as white; they see us as white men. They see us as a race, and our enemy can see who we are whether we want to define ourselves as such or not. We are white.

.. You can go up, you can look at elective identities — I’m into weightlifting, I’m into Star Trek — and you can keep going down, and you go down, and down, and down, and you get to the root of identity. You get to that base, where you can’t go any further. And that is race.

.. It was an open country for Europeans who confronted people who were radically different than they were. And that confrontation, I’ll be honest, was terrible, bloody and violent. It was terrible, bloody and violent, but we conquered this continent. Whether it’s nice to say that or not, we won. And we got to define what America means, we got to define what this continent means. America, at the end of the day, belongs to white men.

.. I re-watched perhaps my favorite movie, which is John Ford’s The Searchers.

.. But we won’t be out on that limb forever. At some point, Texas is going to be a wonderful place to live. It’s going to be a great place to live. But perhaps our bones have to be in the ground before that will happen.”

.. Texas is a wonderful place to live. And there are a lot of the white man’s bones in the ground to make that happen. White people did it. And I’m not going to ever claim that there wasn’t a lot of brutality that went along with it. But we did it. Our bones are in the ground, we own it, and at the end of the day, America cannot exist without us. We defined it. This country does belong to white people, culturally, politically, socially, everything. We defined what America is.

.. it’s not just whoever happened to do the labor. Other people could have done it. But no one could have imagined it, no one could have designed it, because no one else did. History is proof.

..  Embedded in that slogan “Make America Great Again” is its opposite, and that is an acknowledgement that America is not great. I think we know that. I think we know that in our bones and our guts, that things are getting worse.

.. Previous generations couldn’t imagine that their children would have a worse world than they enjoyed, even a worse world than their parents enjoyed. Now 75% of white people think the country is on the wrong track; who could disagree with them, exactly? Does anyone think it’s getting better? “

..  We assume that America is not great. And it isn’t. And why isn’t it great? America is not great because in my lifetime, America has lost an essence. It’s lost a people, it’s lost a meaning.

.. they don’t talk about America as an historic nation and a people with a story, as the product of a race, of a worldview, they basically talk about America as a platform for all of humanity. They talk about America as an economic system, effectively.

.. Many have talked about the Roman Empire’s decline. It went from being a people to being a population, then to being a mob. I think that says a lot about the fall of Rome. America went from being a frontier, to being a people, then to being an economic platform for consumers from around the world. And let there be no doubt: Americanization, in this worst possible sense of the word, this is what Hillary Clinton was talking about when she said she wanted a “hemispheric open market.” This is what George Soros and Mark Zuckerberg want. They want an undifferentiated global population, raceless, genderless, identityless, meaningless population, consuming sugar, consuming drugs, while watching porn on VR goggles while they max out their credit cards.

.. Don’t deny that that is the kind of passive nihilism that so many in the elite class actually want. They want a world without roots, they want a world without meaning, they want a flat grey-on-grey world, one economic market for them to manipulate. That’s what’s happening in the world.

.. It isn’t just a great erasure of white people. It isn’t just an invasion of Europe, an invasion of the United States by the third world, it is ultimately the destruction of all peoples and all cultures around the globe.

I’m not paranoid, they’re just out to get me.

.. We might not all be able to put it into those words, but we know that that is what America is becoming. It’s becoming an homogeneous consuming mass

.. But just the fact that Donald Trump said that word “great” — “Make America Great Again” — meant that he had higher hopes than the Clintons, and the Zuckbergs, and the Bill Gates, and the George Soroses combined. That he had a sense of height, of upward movement, of greatness, of that thing that makes the white race truly unique and truly wonderful, that striving towards infinity, that however vulgar he might be that he had a sense of it.

.. What we need right now are people who are willing to speak truth to power. I find that there’s this amazing thing about the Left. And I have a certain respect for the Left, believe it or not. I understand the Left in a way. What I find so amazing about the people who are protesting me out there, who are attempting to create the largest safe space in the world of 100,000 people at Kyle Field, is that they think they’re the underdog.

.. Richard Spencer is not the Establishment. Richard Spencer is not running the government. Richard Spencer is effectively a heretic in the modern age

.. Think about those places of power. The US military, public education (academia), major corporations whether they’re financial on the east coast, Silicon Valley, what have you. What do they all agree on? “Diversity is good.” “We’re all the same.” “We’re one world.” “C’mon man, we all bleed red.

.. You might think that that kind of limp liberalism is some kind of underdog perspective, that you’re speaking truth to power by saying that nonsense. You are not speaking truth to power. The military-industrial complex agrees with you, so does every major corporation, so does the US government. You are not speaking truth to power, you are power speaking.

.. These institutions do not want you to have a sense of yourselves. They do not want you to have identity and rootedness. They do not want you to have duties to your people. They do not want you to think of yourself as part of an extended family that is bigger than any single individual, because the moment you have those duties, the moment you have that identity, is the moment that you are no longer the perfect, passive consumer-citizen that they want to create.

.. But I will tell that to white people: have a goddamn identity, have a sense of yourself. Be a part of this family.

.. Having an identity is the greatest challenge to the power structure that there is. Speaking truth to it means speaking the truth about race, about people, about nations, about who we are

Commodity Culture

All great spirituality is about letting go. I say this as an absolute statement.

.. You see, if something is working, you don’t need another one or a higher one or a better one—which is what a consumer culture builds on. If something is already making you happy, you don’t need more of it. The fact that you need more and more and better and better of almost everything tells me that the commodity culture isn’t working.

.. The task of healthy religion is to communicate to you your inherent dignity and the dignity inherent in everything else too. If you do not discover that deep inherent meaning, then everything else will finally disappoint you, driving your obsession with more. As the Twelve Steppers wisely say, “You only need more and more of what is not working.”