MM – “Without a reliable pension system and safety net like medicare, people always save for the rainy days.” I’m sure you’re aware of this but a lot of people might not be and it’s that whereas the West is used to relying on retirement homes and communities to care for the elderly, Chinese people don’t because of how the family is structured. The children care for the parents in their old age and so the need for a financial safety net such as a reliable pension system (though ask retired airline pilots how that pension is doing, not as reliable as it once was!) and medicare simply isn’t as critical as they are here. So I don’t think that’s a good reason as to why people save for a rainy day.

Andy’s story, however, does explain a reason why you would save for a rainy day (mistrust in banks, especially since they can go bankrupt) but not necessarily why you wouldn’t borrow. If you borrow the money from a credit card company, they can’t come and order you to pay it off, you can always make minimum payments so you are safe there but the fiscally conservative attitude would be a reason why you wouldn’t want to overspend (i.e. borrow to spend). I hope that all made sense.

I work with people who spend their entire paycheck every other week, in debt up to their eyeballs and if anything happens to effect that vicious cycle, they go beyond broke. I can’t figure what makes them different or why they do it, other than they can and The Man tells them its OK to give all their money away because there’s always more to borrow and they beleive it.

The other week I asked a couple of Chinese co-workers why the savings rate was so high there. They both said that it’s because most people are so conservative and risk-averse that they save for everything before buying it. Could you imagine anyone saving for their entire life to buy a house in the US? If the savings rate numbers were redone to take into account things that Americans buy on credit vs. saving for (i.e., house, car, school), I think the difference would be much lower. The ready availability of credit and willingness to use it also has the effect of essentially preventing anyone from actually being able to save enough to buy a house, since the prices are so high and rise so much faster.

I’ve experienced the restaurant tab owing myself and have see it as a kid between my mother and aunt after dim sum. My sister and I call it “check kung fu.” You’d see my mom and aunt duking it out with the check. They’d literally each grab one end and start to pull. They’d both get red with exertion and growls of frustration can be heard during the struggle. The victor usually has a smirk on her face that would linger until the check has been paid. The loser would utter promises of retribution at the next dim sum meal. As a kid, it was better than courtside seats at Wimbledon. My eyeballs would just follow the action of two matronly looking ladies getting their game on.