With official and private factory data telling different stories about China’s economic momentum, the sub-indexes may provide a clearer – and bleaker – assessment of where the economy is headed.
In a related story, a new Chinese study published last week, finds that of those aged 60 and over, 22.9% are living below the poverty line. Although Chinese people are some of the world’s best savers squirreling away some 30% of their income (compared with 2.5% for North Americans today), low incomes make it hard to build the retirement nest egg. Those aged 45 and over have a median wealth per capita of 33,340 yuan, equal to about five and a half years of spending. Sounds familiar to the capital crunch facing those approaching retirement all over the world today. And as far as young people being able to buy assets off the old…well prices would have to become more affordable first, and that will hit the balance sheet of the older population right where they will feel it most. Quite a tangled web. See: Let me not see old age in China
“That likely reflects massive income inequality. With the bulk of the saving done by China’s rich, average households have little stored up. That means China’s workers will have to continue saving to avoid poverty in retirement.
A solution isn’t easy. Bringing down house prices could be a catalyst for higher consumption, allowing first time buyers to get on the ladder without having to save as much first. But lower prices would hit existing home owners hard, forcing them to save more for retirement. About three quarters of the wealth of Chinese people aged 45 and over is tied up in housing.”