Rich-poor gap explains why savers ignore Beijing's call to spend

A clue as to why sustained efforts by Beijing to encourage people to spend have failed can be gleaned from the profile of depositors.

Caijin Ribao, a new financial daily, recently ran a piece by Sun Guofeng, a People's Bank of China official, who disclosed a number of interesting figures many foreign researchers have been dying to lay their hands on. They answer the question: just who are the country's savers? Mr Sun quoted findings of a random survey, which confirmed for the first time what many mainland economists privately suspected: about half of the private bank savings are held by the filthy rich, and the other half by people in the low and middle-income groups.

Specifically, the findings show that 47 per cent of private bank savings - which reached 5.9 trillion yuan (about HK$5.5 trillion) at the end of last month - are held by just 3 per cent of the savers.

The survey did not identify the occupations of these savers, but they are likely to be film stars, singers, entrepreneurs, and, perhaps, managers in state enterprises who illegally channel corporate funds into private accounts.

The remainder is held by people in the low and middle-income groups who are mostly saving for a rainy day.

These findings suggest that recent attempts to increase money supply and popularise retail banking are not effective because they are aimed at the wrong target groups.

If increased money supply goes into the hands of the rich - as many suspect - the money will be squirrelled into bank accounts rather than into consumption. The wealthy, after all, must already have bought their own apartments or houses and cars. So, there is little incentive for them to spend.