Opinion / Why Chinese millennials are willing to max out their cards for luxury goods

This article was originally written by Yiling Pan for Jing Daily

The Chinese dream of luxury brands is largely dependent upon the nation’s millennial and Generation-Z shoppers, whom global management consultants Bain & Company estimated would account for 46 per cent of purchases in that market by 2025.

But what if this promising outlook is partially fuelled by debt?

A recent HSBC survey shows the debt-to-income ratio of China’s post-90s generation (typically born between 1990 and 1995) has reached a staggering 1,850 per cent.

Meanwhile, the average debt this group owes to a variety of lending and credit-issuing institutions is more than 120,000 yuan (US$17,433).

To make a comparison, that is nearly half the debt of US millennials, who on average owe US$36,000, according to latest figures from US financial services firm Northwestern Mutual’s 2018 Planning & Progress Study.

Data released by US-listed Chinese financial lending platform Rong360 indicates that about 85 per cent of applicants for consumer lending in China were born after 1980. A detailed breakdown of the survey shows that 24 per cent of lending applicants were born between 1980-84, 7 per cent in 1985-89, 37 per cent in 1990-94, 12 per cent in 1995-99, and 4 per cent after 2000.

Young Chinese may decide to embrace a life with debt for several reasons. As a group that desires instant gratification, running into debt to pre-own a high-profile luxury item that they will only be able to acquire in the future is certainly acceptable.

Yu Runting, a 26-year-old mainland woman working in a marketing and public relations firm in Shanghai, is one of them. Yu’s monthly net income is only RMB 9,000 (US$1,316) of which some 95 per cent goes on rent, basic necessities and other expenditures.