Changes in China's Spending & Savings Patterns May Boost Ecommerce | EMQQ

17 January 2020

China has long been a nation of savers. These savings helped to create the capital in China to fund massive infrastructure projects, fund investment around the world, and drive large purchases of U.S. Treasuries. However, an article in the Wall Street Journal noted how this pattern is changing. The population in China is saving less while borrowing more. This shift is leading to a more consumer-oriented economy in which the population spends more on items like apparel and electronics, travels more, and borrows more [1].

Potential beneficiaries from a consumer-oriented society that is acquiring more debt include ecommerce firms such as Alibaba (BABA) and (JD) which sell the products that the population is increasingly consuming, travel providers such as Ctrip (CTRP) which fulfill the population’s desire for travel, and apps-based lending companies such as Ant Financial (1/3 owned by Alibaba) and Tencent’s WeChat (TCEHY) who lend them the money.

Saving Less

In 2010, the average Chinese worker saved 39% of their income.  In 2019, that amount has declined to 33%, while some younger Chinese workers save nothing at all, according to the WSJ.

Borrowing More

Individuals are borrowing more to fund new cars, houses, and international travel.  The WSJ article noted that in 2018, Chinese households owed 54 cents for every dollar of GDP.  That figure is expected to rise to 68 cents by 2024.  The U.S. rate is 78 cents. 

Mortgages have become a large percentage of debt.  Nearly 22% of the income of middle-class Chinese works covers mortgages.  For lower-income Chinese workers, that figure is 41%.

Less Fuel for Government Spending 

Savings are ultimately invested back in the economy.  In the past, a large portion of those savings were lent to the government which used them to fund large infrastructure projects.  Less savings means less money for the Chinese government to spend on infrastructure projects. 

Additionally, as China imports more to fuel increased consumer spending, its foreign-exchange reserves are reduced, and there is less money to buy U.S. Treasuries.

Creating a More Consumer-Focused Economy 

Chinese consumers are borrowing and spending to fuel purchases of electronics, cars, real estate, and international travel.  Consumer spending may help to create new growth momentum for China.  It may also help to spur the creation of small businesses and other foundations of a sustainable consumer economy.

Savings Moving to App-Based Financial Firms 

There has also been a shift in where the Chinese population saves and borrows money.  Rather than being deposited in government-insured financial institutions, many are turning to app-based financial firms. 

According to the WSJ, at least half of China’s population has an account with Alibaba’s one-third owned affiliate Ant Financial’s Tianhong Yu’e Bao app-based mutual fund or similar investments through Tencent Holding’s WeChat, which offer higher payouts.

These firms turn deposits into short-term loans for companies and consumers.  In fact, the WSJ noted that loans promoted through Alibaba and Tencent are replacing mortgages as the fastest-growing source of individual indebtedness in China.

Default Rate Concerns

However, some financial firms are noting that delinquency rates are rising.  Additionally, debt is rising just as the economy is showing signs of slowing down, and an aging population is on track to tap savings for their retirement.


The Chinese population is beginning to save less and spend more.  This may help to transition China to a more consumer-oriented economy.  This may benefit ecommerce firms, travel companies, and app-based lending sites.

Find out more about the Emerging Markets Internet and Ecommerce UCITS ETF (EMQQ) 


Article Date: 23rd January 2020. 

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