Zhu Rongji

Public's saving spree 'threatens economic growth'

PUBLISHED : Sunday, 28 March, 1999, 12:00am
UPDATED : Sunday, 28 March, 1999, 12:00am

PREMIER Zhu Rongji's strategy of maintaining high economic growth by stimulating domestic demand is facing an uphill battle as more people opt to save money rather than spend it.

Total personal deposits rose 340 billion yuan (HK$318 billion) to 5,680 billion yuan in the first two months of this year, compared with a rise of 720 billion yuan for all last year, the Economic Daily reported.

The surge in deposits was unexpectedly high in view of the steady national wage level and declining interest rates.

The newspaper said the soaring deposit rate suggested people were unwilling to spend.

'This clearly is not beneficial to solving the over-supply problem, boosting the sales of the enterprises' products and expanding domestic demands,' it said.

'If consumption demand is not stimulated after being stalled for a long time, it might offset some effects of [the state's] expanding investments and will not help overall economic growth.' The paper believed people had decided to save their money in anticipation of a drop in wages.

With the stagnant consumer market and mass lay-offs by state-owned enterprises, many urban people had found their income growth suffering as a result of wage cuts.

Farmers also experienced falling incomes due to the worsening performances of township enterprises, while surplus workers struggled to find jobs in cities.

People were also saving money because, with their basic needs satisfied, urban families were looking at more expensive items like houses and cars - but most were discouraged by high prices, a lack of mortgage loans and insufficient roads and parking, the paper said.