China's Youth Fuels the Consumer Boom

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From Confucians to Consumers
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When we go out and we talk to youth, we find that they have an effective savings rate of 0.

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<p>So we see, we estimate, about 250 million emerging middle class, people who make between 6000 and 15000 US Dollars per capita per year. These are the people that businesses need to be targeting, because they&rsquo;re going to keep growing. And so, because China&rsquo;s becoming not export-led, it&rsquo;s now becoming more consumption-led, it&rsquo;s just going to keep growing. And I see 2-3 decades of pretty stable growth. You see, a lot of economists say that China&rsquo;s household savings rate is very high, 40-50%. I actually completely disagree. I think that&rsquo;s a very high school-ish way of analyzing the markets. If you go to people older than 50, absolutely, it&rsquo;s probably 50-60% savings because they&rsquo;re concerned about their social security, they&rsquo;re concerned about their rising medical costs. But when we go out and we talk to youth, we find that they have an effective savings rate of 0. You know, they&rsquo;re very similar to Americans. They go out, they buy on credit, there&rsquo;s huge revolvers, these are people who...the girl who massages my feet, she makes about $120 a month, but she has a $300 phone which she changes every 6 to 9 months. So there is that optimism, there is that type of buying on credit, there is very low savings in that age group, which I think is going to continue to fuel economic growth here. So, if you were a multinational, or if you were a private equity firm, or a hedge fund, anybody that&rsquo;s trying to invest in the China market, we really look at Chinese youth as that major driver for growth. And it's a very exciting community. If you look at the American baby-boomers, when they were 30 years old, they fueled the go-go 80s on Wall Street. They were the ones buying the Ferraris, the nice pens, the nice watches and now that they&rsquo;re 60, they&rsquo;re looking at medical care and everything about them. You&rsquo;re finding the exact same type of culture, the exact same type of spending habits in China&rsquo;s baby boomers now, who are about 30 years old. And they&rsquo;re just going to keep on spending.</p>
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Shaun Rein talks about how China's youth and baby boomers are forming the base of China's growing consumer revolution, an economic force that Rein says will provide the country with 2-3 decades of steady growth.