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The young and the cautious

The world, teetering on the edge of another financial crisis, needs Chinese consumers to save less and spend more. Chinese consumers need to increase domestic demand so the country can reduce its heavy reliance on exports to keep fueling economic growth.

But Chinese consumers aren't playing ball. They are diligently saving money and cautious when it comes to spending money, evident by the country's consumption-to-GDP ratio of 36 percent - only half that of the United States and about two-thirds the figure for Europe.

Bank executives are optimistic that credit cards will be the answer to encouraging Chinese consumers to spend, just as they have on consumers elsewhere.

With about 230 million credit cards issued by 2010, bank executives are salivating at the prospect of tens of millions more consumers adding credit cards to their wallets.

With more than 2.1 billion debit cards in circulation for a population of about 1.3 billion, it is only natural to assume Chinese consumers have a voracious appetite for plastic and would therefore be as enthusiastic about credit cards. This expected exponential demand for credit cards hasn't happened.

Credit cards haven't proved to be particularly profitable so far. Profitability per card, according to the Lafferty Group, is thought to be roughly $1 per year.

New research conducted on young, affluent credit cardholders at a private university in China sheds light on why the picture is unlikely to improve dramatically for credit card companies any time soon.

The research, a joint project involving Australia's Monash University and The University of Nottingham Ningbo China, also suggests that we should not rely on consumer credit to structurally change how Chinese spend money, and, by implication, the world economy in the short term.

Credit cards, blamed for many a household's financial woes in the United States and Europe, are relatively new to China. They were only permitted beginning in the mid-1990s, resulting in structural impediments to the development of China's consumer finance industry.

It is well-known that the idea of saving is deeply entrenched in the Chinese culture. It is estimated that the average Chinese family saves 25 percent of its discretionary income - six times the savings rate for US households and three times the rate for Japanese.

Not common knowledge, however, is that youths are just as thrifty savers as the elderly. Urban households headed by 25-year-olds are believed to save about 30 percent of their disposable income. Households with sons are the main accumulators of assets, especially property.

We investigated the attitudes of young, affluent Chinese toward credit cards in order to determine whether they will become popular among this important group of consumers. It is, after all, among young people where major shifts in behavior tend to occur and how new consumer spending trends develop.

We chose The University of Nottingham's Ningbo, China, campus because it is located in Zhejiang, which is one of the most developed provinces in China, with high levels of income per capita and therefore a large potential for credit card usage.

University students make an ideal sample for a credit card study because they represent a section of the population who are quite different from their parents' and grandparents' generations in terms of their consumption behavior.

They are, in short, more likely to hold a credit card.

We canvassed the views of more than 150 students, screening them first to ensure that they were credit card holders. The majority of the students sampled received a generous allowance from their parents, which meant there wasn't a financial constraint on potential credit card usage.

In the case of undergraduates, the average annual allowance of 20,000 yuan (2,170 euros) is almost twice as high as the average annual income of a Chinese worker. Postgraduates typically receive about 45,000 yuan a year.

Most undergraduates, 71 percent, held a single credit card, while 75 percent of postgraduates owned more than one card and as many as three.

However, holding multiple credit cards did not result in greater usage. More than half of the students used their cards only once a month, with nearly one-third only using their credit cards once or twice a year.

The main reason given for the limited usage was the lack of a payment terminal infrastructure, even in modern second-tier cities such as Ningbo.

One student said: "Unfortunately, we cannot use our cards wherever we want. Small shops don't have payment terminals so we cannot use them as often as we would like."

The second most common reason for not using a credit card was the terms of the payment method.

Another explained her card was issued in her hometown. "When I want to pay it back I need to go there to give the money to the bank. I cannot do it here so I don't think it is convenient."

Clearly the banks and the authorities need to get together to find more ways to accept credit cards and re-think the awkward repayment method. Currently, it's not easy to use and manage a credit card in China, even if you wanted to shop until you drop.

There is another obstacle in the way of the credit card market developing, and it is potentially much harder to resolve because it involves deep-seated attitudes toward money.

Young, affluent consumers are very astute about the risks involved in using credit cards. And they are very aware of the costs associated with borrowing money.

Cardholders interviewed in focus groups told us that they believe it's more convenient to pay with a card than cash, and that they believe carrying cash can be unsafe.

However, these positive associations of credit cards were tempered by the concerns of the loss of financial control.

At least two-thirds of all of the students interviewed believed that paying by credit card encourages people to spend beyond their means, even if they use the card infrequently. And, they have tremendous feelings of guilt associated with using a credit card or racking up debt.

Several students made comments similar to this: "I don't like using future money to pay for today. I did not make any money today and I still used money (to purchase products) when I use my credit card . ... I feel guilty for that."

So, clearly, it is not just the convenience of the service provided that influences card usage, but there is also an underlying fear of overspending and a loss of financial control.

The good news for credit card companies is that the lure of promotions sometimes outweighs the risk aversion.

This, our analysis suggests, is particularly the case for promotions that advertise discounts and additional free products because they tap into the cultural perceived necessity to both save and yet simultaneously accumulate products to show wealth to others.

Signaling wealth is very important, though it is still best done in China by flashing cash around.

As one respondent in our study observed, "Cash is still king . A businessman with a lot of cash in his wallet shows that he is affluent."

Reminding the young and the affluent that they are part of a new generation is also important in getting buy-in. Students spoke about credit cards making them "feel cool" and as objects to emphasize that they are different, and perhaps more sophisticated, than their parents.

But overall, marketers have a tough job on their hands trying to convince China's Little Emperors to churn up debt using revolving credit. They still retain many of the conservative cultural attitudes of their parents when it comes to debt.

They are also keenly aware of the high costs of using a credit card to make cash advances. Unlike their peers in the West, young Chinese consumers do not have a laissez-faire attitude to money and long-term savings goals.

The implications for the West are we shouldn't count on credit cards to get the tills ringing in China to help stimulate developed economies.

Bank executives, meanwhile, should consider other financial offerings for the enormous, but fairly elusive, young customer base in China.

The author is an assistant professor of marketing at the Nottingham University Business School China. Her full research report on credit cards in a Chinese cultural context, with professor Steve Worthington and David Stewart of Monash University's department of marketing, is in the latest Journal of Retailing and Consumer Services. The opinions expressed in the article do not necessarily reflect those of China Daily.

Jiangdong opens College Grads Startup Park

Since 2009, an incubator for college grads to start up business has been in operation in Jiandong. The startup park got the approval from the Jiangdong government in Nov. 2009.

The Startup Park totals 3,230 square meters in floor space. It provides all necessary equipment, such as furniture, computers, printing machines, air conditioners, wide band, etc, as well as initiation funds, training of project management and startup training, etc. Different from other startup parks, the Jiangdong College Grads Startup Park attaches importance to startup training, financing services and feasibility study services. In this way, the start-upers can focus more attention on research and development.

So far, the park houses 31 companies started up college grads. They are engaged mainly in technological services and information services, such as IT, electronic technology, energy-efficient technologies, electro-mechanical services, E-commerce, network technologies, etc, with output value reaching 123.71 million yuan. The college grads take a share of 61%. The Park is dedicated to offering best services for those young college grads who want to start up their own businesses in Ningbo.

Learning Mandarin: 7 Dos and Don'ts

The path to speaking fluent Chinese can be a rocky one, as any expat who has ever tried to learn will tell you. Everyone has their own tactics, methods and techniques, but there are some definite dos and don’ts to bear in mind, no matter what level you’re at. Here are our top tips:

Learning mandarin chinese tips
Photo: billaday

1) DON’T expect to be an overnight expert
One of the most frustrating things about learning Mandarin is the rate of progress. European and American expats who learn other European languages with relative ease often find that Chinese is a whole different kettle of fish. For English speakers, becoming fluent in German, French or Spanish only takes a year or so, but for a language like Mandarin which has literally no reference points, it’s another story. As long as you cut yourself some slack, and realise that progress will be relatively slow, you’ll hopefully relax enough to accept learning at your own pace.

2) DO practise often
Taxi drivers, colleagues, friends, strangers in bars… It might sound mercenary, but if you want to progress, you should treat social interactions as opportunities to practise. In Beijing and Shanghai, this might not be so easy, as your potential conversation partners will probably want to practise their English on you, but with perseverance, you should be able to spend a good part of your day speaking Mandarin. As for organised language exchanges, not everyone likes them, but they can be a great tool if structured correctly (i.e. setting time limits and topics for discussions in both languages).

3) DON’T rely on pinyin
Sure, learning characters is a bit of a drag, and there are so many of them, but if you rely on pinyin – the mostly commonly used Romanization method – alone, your rate of learning will grind to a halt pretty quickly. Just think about how many possible meanings there are for the pinyin “yu”; without characters to identify which “yu” you’re dealing with, you have no idea about what it could mean (there’s only so far context can stretch). Set yourself a target of learning a character a day, and you’ll find yourself learning more in the process, from radicals or characters that look similar.

4) DO learn tones
For native speakers of non-tonal languages, facing the prospect of learning tones as well as everything else can be daunting. However, you should get into the habit of learning each new word as a bundle: sound, tone, character. Don’t make the mistake of thinking tones don’t matter; they do. A recent famous example is the underground online movement known as “cao ni ma” which, when pronounced with certain tones means “grass mud horse”, and when pronounced with other tones means… something completely different.

Having said that, fluency is more important than rigid tone-obsession that might slow you down unnecessarily; if you spend too much time and though pronouncing each character your sentences won’t flow right and people still won’t understand you.

5) DON’T waste money on bad teachers
Just as there are plenty of dodgy English schools knocking around, trying to fleece learners and exploit the popularity of the language, so there are maverick Mandarin tutors and establishments keen to rip you off.

6) DO ignore boasters and flatterers
Everyone knows at least one boaster – an Old China Hand who has lived here for ages, and whose Mandarin is practically native (or so they believe). They scorn the efforts of lesser talents, and speak effusively about their own linguistic flair. Ignore them. Concentrate on your own studies, and take other people’s claims and opinions with a pinch of salt.

Likewise, it can be easy to fall into the trap of thinking you’re better than you are, especially when taxi drivers compliment you on your incredibly Chinese after only a “ni hao”, or when you impress your friends back home with your newfound skills. Just make sure you keep things realistic.

7) DON’T Forget to Use Web Resources
These days, web resources for learning Mandarin are plentiful, and there are some excellent programmes and websites out there. We’ve tried most of them, and recommend as a dictionary and flashcard tool, ChinesePod for its diversity and usability, and for simple exercises. Wenlin is also an invaluable tool, and the Google Pinyin input method should be on every Mandarin learner’s PC or laptop. Ask your friends and colleagues what they use, and ask them to pass on any software they have.

We’re not saying these are fool-proof tips, or that they’ll make you instantly fluent, but bear them in mind, and you might find yourself progressing just a little bit faster. 加油!

By Susie Gordon,

China College Student GO Competition Held in Ningbo

The 20th Ing Cup Chinese College Student GO Competition was held at the Ningbo University on August 2. This was the first time that Zhejiang higher institutions have undertaken such large-scale GO events. The competition is to be concluded on August 8.

The competition was carried out in three groups: professional, amateur, and women. 36 teams with 200 players took part in it, representing Qinghua University, Beijing University and other universities, as well as universities from Taipei and Macau. In addition, five teams from Korea also took part in it. The undertaker of the event, the Ningbo University also sent a team of six members to participate.

Record number of student applications at Sino-foreign university

A record number of students have applied to study at The University of Nottingham Ningbo China (UNNC) this year.

With stiff competition for places at the English-medium University, the first Sino-foreign university established in 2004, the minimum college entrance exam (gaokao) scores for applicants offered a place has also risen sharply.

This means it is mostly only the highest-achieving school leavers who made the grade this year for undergraduate studies at the University, which is situated in the attractive coastal city of Ningbo in China’s prosperous Zhejiang province.

The University only accepts Chinese students with the top grades (Division 1).

Read more: Record number of student applications...

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