Driving around the Chinese town of Yi Wu, my crew and I were listening to the radio when an ad came on encouraging listeners to trade in their old TVs and washers for new ones.
"You can get a 13-percent rebate!" the speakers blared.
The government is going all out to promote its rebate programs and get its citizens spending. The manager of Xin Hong Electric, a store selling electronics and appliances, told us his sales were up as much as 30 percent. Not only can Chinese get discounts on new refrigerators, dryers or microwaves but cars too. Car sales were up nearly 80 percent in October compared to a year ago, driven in part by tax breaks and China's version of the U.S.'s "Cash-for-Clunkers" program. China is expected to overtake the United States as the world's biggest car market this year.
At Xin Hong Electric, I was struck by how many people were taking advantage of the rebate. We met up with a paper fan maker who had just bought a new fridge to add to his recent purchases: a TV, an air conditioner, a washer, and a microwave. He told us he had wanted to upgrade his appliances, anyway, and thought, why not do it now and save some cash?
That savers' mentality is said to have contributed to the imbalances in the world economy. Americans have been taking on too much debt and overspending, while Chinese (and certainly many other consumers in Asia) have been saving for a rainy day. Many economists say the government trade-in programs have had some success, but getting Chinese to feel comfortable spending will take a lot more work. They say the government will need to improve its retirement and health care programs so that people don't have to worry as much about paying large potential medical bills. The bottom line is consumers need to feel confident enough in the future to open their wallets today.
How confident are you in your home country's economy?
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