The conventional wisdom used to be that Americans are spenders while Chinese are savers.
That was borne out by data showing that the Chinese save 40 percent of their income, compared to 3 percent in the U.S.
But now the trend is reversing. While U.S. consumers are unwinding their massive credit card debt, card issuance has jumped 32 percent in China over the last year, according to official and private data.
The results haven’t been pretty.
Take the case of 27-year-old, unemployed Beijing resident Yuan Shuai. CNN reports that he has piled up $29,000 in debt on seven different cards over the past two years.
"I spent money on eating and having fun," he told CNN. "That's all." Banks are now chasing down his father for payment.
This isn’t good news for the world economy. China’s savings are financing a good portion of our debt burden.
The Chinese hold $797 billion of U.S. Treasuries. If China’s citizens rack up huge credit card bills, the country will have to worry about financing its own debt.
A consumer debt buildup would only add to concerns that a financial bubble is percolating in China.
Peter Tasker, an analyst at Arcus Research, wrote in The Financial Times that China may repeat Japan’s mistakes.
“If China continues to follow the Japanese template, the end of the dollar peg will be the trigger event, setting off a Godzilla-sized credit binge.”
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