Savings surge highlights fears

PUBLISHED : Monday, 31 May, 1999, 12:00am
UPDATED : Monday, 31 May, 1999, 12:00am

Mainlanders' savings have risen by a record margin in the first four months, despite falling interest rates, due to a lack of alternative investments and fears for the future.

As of April 30, individual savings exceeded five trillion yuan (about HK$4.65 trillion) for the first time, rising by 180.8 billion yuan, a record increase for the four-month period, the China Business Times said.

Of the total, 4.11 trillion yuan was in fixed deposits, an increase of 120.7 billion yuan over a year earlier, and 89 billion yuan in current accounts, up 60.1 billion yuan.

The newspaper gave four reasons for the rise.

With the economy slowing, there was a lack of investment outlets for private businesses, who preferred to park their money in the banks until they could find a better alternative.

Second, people are becoming increasingly fearful of the future, as the state shifts the cost for housing, medical care, education and old age on to individuals, while job security is diminishing. More savings are kept in the bank as an insurance against future spending.

Third, there is a lack of popular new consumer items and decreasing interest in the stock market.

In the first quarter, the issue of new shares fell 24 per cent over the same period last year and share turnover dropped 35 per cent, as many people pulled their money out of the market, which was closed for two weeks over the Spring Festival Holiday and has performed poorly since.

Fourth is the widespread, though illegal, depositing of company money in personal accounts, to escape tax payments, debt-collection agencies and other forms of supervision by the authorities, especially at a time when the companies are not performing well and may be closed or go bankrupt.

Such accounts, popularly known as 'air-raid shelters', are officially estimated to account for about 10 per cent of personal bank savings and encourage corruption by company officials.

This enthusiasm for saving is bad news for Beijing in its efforts to encourage people to spend more and boost consumer spending.

Economists believe the government cannot rely in the long term on fiscal stimulus and with exports expected to fall or be flat this year domestic consumption is the key engine of growth.