Almost every one is hoping that China’s citizens will ramp up their consumptions to at least offset part of the global consumer contraction. However, most westerns highly under-estimate the ability of Chinese to live frugally and to hoard cash. In fact, almost all people in emerging markets do much better than Americans or Europeans to adapt to a more frugal environment.
While China’s government will certainly try to relax credit and increase spending to stimulate the Chinese economy, but if Chinese perceive that hard time is coming, which many already do, it will take a lot more efforts than most people think to pry cash from their hands to spend on unnecessary items.
In the recent few days, global stock markets have rebounced quite a bit from its low, but the Shanghai Composite has not participated much in it. This should be very troubling to those hopeful souls who are counting on China to save the world economy.
