August 31, 2009
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The Chinese Are Taking Notice, Pt.3
Getting A Handle On ItAccording to the United States' National Bureau of Economic Research, U.S. citizens save on an average 3.2% per household. The Chinese, on the other hand, are the World's champions at building a nest egg. The country's savings rate is over 39.7%. This newest credit card trend is threatening to rob its citizens of their hard work as the card companies continue to pursue the Chinese citizens. As young Chinese consumers who cannot afford the luxury of credit cards become more dependent on them and Chinese parents continue to pay off their adult children's debt, danger now lurks within not just one, but two generations. The good intentions of stimulating consumer consumption may soon backfire as analysts predict the country's credit card debt defaults will rise to 3% by the end of the year. Their default rate is nearly 2.4% currently. Here in the U.S., it is approximately 10%.
A major portion of the growing problem with young people and their growing mounds of debt was fueled by greedy banks that were battling to gain their share of the pie. Together with the universities, banks were participating in marketing strategies were less than ethical. One university filled out credit card applications without the student's knowledge or consent to assist the bank in meeting its card quota. The results; over 10,000 new card accounts were opened. It was virtually impossible for a student to walk around campus without being badgered into applying for a credit card.
The Chinese banks have taken several steps to rectify this growing credit card problem. In February, Citi China Bank and China Merchants Bank have both halted their card programs for students. Additionally, China's largest commercial bank, the Industrial and Commercial Bank of China, has restructure their marketing strategies and are only offering new cards to Graduate students and certain undergraduates with promising career opportunities.