What is Big Think?  

We are Big Idea Hunters…

We live in a time of information abundance, which far too many of us see as information overload. With the sum total of human knowledge, past and present, at our fingertips, we’re faced with a crisis of attention: which ideas should we engage with, and why? Big Think is an evolving roadmap to the best thinking on the planet — the ideas that can help you think flexibly and act decisively in a multivariate world.

A word about Big Ideas and Themes — The architecture of Big Think

Big ideas are lenses for envisioning the future. Every article and video on bigthink.com and on our learning platforms is based on an emerging “big idea” that is significant, widely relevant, and actionable. We’re sifting the noise for the questions and insights that have the power to change all of our lives, for decades to come. For example, reverse-engineering is a big idea in that the concept is increasingly useful across multiple disciplines, from education to nanotechnology.

Themes are the seven broad umbrellas under which we organize the hundreds of big ideas that populate Big Think. They include New World Order, Earth and Beyond, 21st Century Living, Going Mental, Extreme Biology, Power and Influence, and Inventing the Future.

Big Think Features:

12,000+ Expert Videos


Browse videos featuring experts across a wide range of disciplines, from personal health to business leadership to neuroscience.

Watch videos

World Renowned Bloggers


Big Think’s contributors offer expert analysis of the big ideas behind the news.

Go to blogs

Big Think Edge


Big Think’s Edge learning platform for career mentorship and professional development provides engaging and actionable courses delivered by the people who are shaping our future.

Find out more

Lessons To Learn From China's Not-So-Big Spenders

February 13, 2012, 12:00 AM

What is the Big Idea?

In a recent trip to a Costco in Manhattan, shoppers were seen pushing around large shopping carts filled with items like family-sized jars of mayonnaise and bulging packs of fluffy, colorful tube socks. Moms navigated congested aisles with their screaming children and dodged slow moving browsers who stopped to sample free slices of gouda resting on pillowy bread.

It was hard to tell that the U.S. was in the midst of historically high unemployment rates. People were buying up goods like crazy. And it wasn’t just every day necessities like toilet paper and cereal. Several flat screens televisions glided on carts across the parking lot, only to be swallowed up by the trunks of gas-guzzling SUVs. It looked like New Yorkers were preparing for a natural disaster and the only thing that could help them weather the storm was a large case of Skyy Vodka.

That was in December. Last week, the Federal Reserve came out with some data that put all that spending into perspective.

Credit card debt in the U.S. rose to over $19 billion over the holidays. Reports indicate that consumers borrowed to fund essentials like gas, pay for holiday gifts or because they’re getting more comfortable with the health of the economy, or some combination of the three. Either way, it shows that Americans don’t have a problem whipping out their credit cards to pay for some toilet paper and yuletide cheer.

It’s no secret that Americans over spend, borrow heavily and rarely save. And they’re not alone. Around half of American, British and German respondents in a survey conducted in 2009 by TNS Global said they would not be able to come up with $2,000 in 30 days from savings, borrowing, friends or family.

These numbers are unsettling when its compared to how the average household in China fares. Sixty percent of Chinese households save for precautionary reasons, while only 35 percent of American households have similar saving motives, according to Dr. Rui Yao, assistant professor in the Personal Financial Planning Department at the University of Missouri.

Chinese households save over 30 percent of their income, compared to 4.4 percent for Americans, according to a McKinsey & Company report.  In England, the typical household has £5,000 in savings and investments. This compares to over £19,000 in China. This means that Chinese consumers are doing a better job at saving for retirement and that proverbial rainy day. And both Americans and Britons can learn a few lessons from their debt-wary and prudent Chinese counterparts.

What is the Significance?

2012 is an election year marked by political heavy weights who treat China as a punching bag by making claims that globalization and an artificially depreciated currency is the reason for domestic economic woes. But that is only one side of the coin.

China’s nascent credit card market means new opportunities for western financial institutions.
Citigroup will be the first global bank to start issuing its own credit cards in China, according to a Money Watch report. Easing Chinese consumers about buying on credit could boost U.S. exports and stimulate growth in U.S. and Europe, the report says.

Chinese consumers have embraced products from western countries and they’re especially keen on luxury goods, according to a report by McKinsey & Company. By 2020, China’s consumption will double to $4.8 trillion, making it the second largest consumer market after the U.S.

Consumers, especially the young, are already adapting quickly to credit cards. But don’t expect them to accrue much debt.

“Owning a credit card eases the frustration of carrying a lot of cash,” said Yao. “But they will not be accumulating debt the way Americans do.”

Chinese penchant for saving comes stems from several key factors, says Yao.

“Confucianism teaches people living in this culture that they should be prudent, so they don’t want to owe,” said Yao. “Also, the credit market in China is not fully developed so they don’t have any channels other than to borrow from their own savings or from their social networks.”

Before the U.S. recession, mailboxes were flooded with credit card applications. Economists like Tyler Cowen proposes four reasons why Americans are bad at saving, like a tax system that dings savings and investment income which diminishes the incentive to save.

Chinese households have no such temptations to spend. While economic reforms in China meant increased household incomes, it also meant that much of the benefits once provided by state-owned enterprises shifted to private households. For example, health and education spending went from 2 percent of household consumption in 1995 to 14 percent in 2005.

Lack of safeguards like social security and unemployment benefits forces Chinese families to plan for the future, something Americans should adopt since social security is no longer reliable and pension plans are a thing of the past, says Yao.

In addition to precautionary savings, Chinese parents are saving for their kids’ education. College loans are unheard of in China and parents spend years saving for their kids’ education.

“In American culture, when you’re 18, you’re on your own. But at 18 years old, how responsible can you be for your own education?” said Yao. “ I do think that parents may want to start thinking about supporting their kids for longer.”

Fifty nine percent of Chinese urban households save for education, such as college tuition, compared to 19 percent for Americans, according to Yao’s research, where she compared the results from the American 2007 Survey of Consumer Finances and the 2008 Survey of Chinese Consumer Finance and Investor Education.

On a macro economic level, there are pitfalls to saving too much. The Chinese Central Bank decreased interest rates several times in the 1990s to stimulate spending, according Yao.

“If everybody saves the majority of their money, it’s very difficult for the country to keep up with the GDP,” said Yao.

She argues that Chinese policy makers need to create social safety nets to help consumers get comfortable with spending. But still, some Americans don’t have any savings at all and tend to over estimate their future income.


Lessons To Learn From China...

Newsletter: Share: