http://www.scmp.com/business/economy/article/1316280/quick-buck-economy

张化桥:

过去30年，如果你没有灰色收入，并且每个月坚持储蓄15％的税后收入，那么，今天你也许可以买个小房子。
还是投机，和当官来的快。
咱们如何教育小一代坚持储蓄？

Thirty years ago this month, I was a graduate student at the People's Bank of China in Beijing. The average monthly wage on the mainland was about 40 yuan at that time. I was lucky to be paid 52 yuan. But my money would always run out before the next pay cheque arrived.

Fei Yun, my mentor then, was 10 years my senior and in my same class. He taught me how to save at least 15 yuan each month.

Embarrassed and grateful, I have since taken Fei's teachings to heart. However, older and arguably wiser, I have recently turned down several invitations to advise young entrants into the labour force about ways to manage their personal finances and build nest eggs - mainly because I have nothing useful to say.

Saving for a rainy day is a big part of Chinese culture, but that culture, as well as the country's social fabric, is under attack from all quarters, including assaults resulting from the country's misguided monetary policies of the past three decades.

An ordinary civil servant or a factory worker on the mainland might have faithfully saved a fifth of his honest income each year for 30 years. But if he had not borrowed heavily to buy an apartment some years ago, he can forget that idea altogether these days as real estate prices have shot up beyond his wildest dreams.

In the meantime, the purchasing power of his savings has evaporated as consumer price inflation of 5 to 10 per cent a year has consistently run faster than the interest rates of bank deposits, which currently stand at around 1 to 3 per cent. Rentals and housing prices have risen still faster, but they are not in the official statistics on inflation.

In the late 1980s and early '90s, when inflation got out of control, the mainland introduced an "inflation subsidy" to compensate savers. But the subsidy, which amounted to as much as 10 percentage points on top of base rates on deposits, contributed to the crippling of the banks and that led to a wholesale recapitalisation of the banking sector from 2000 to 2002.

The official reasoning for the tight regulation of interest rates (particularly on deposit rates) is typical among poor countries. First, the government argues that the mainland needs low interest rates to grow its economy and create jobs. Second, almost all banks are state-owned and cannot be trusted to set sensible rates on deposits. They may, the argument goes, compete for funds on interest rates, causing a banking crisis.

While the official statistics on inflation are widely discredited, savers instinctively know the true extent of inflation, and have fought back. They have speculated on real estate and the stock market, and directly lent to businesses and consumers.

The banks have also piled in to undermine the interest rate regulations by offering wealth management products at much higher interest rates, bypassing official controls over interest rates, lending quotas and loan-to-deposit ratios. The banks have effectively brought shadow banking under their own roofs.

When deposit rates are kept at artificially low levels, a prime lending rate of 6 per cent is also below a market-clearing level. As a result, demand for loans is artificially boosted, and lending decisions are often based on political and personal reasons.

The consequences of financial repression in the past three decades are evident. Today, the mainland suffers massive industrial overcapacity, real estate overbuild, environmental catastrophe and worsening socioeconomic inequality.

The biggest beneficiaries of the interest rate controls are those who have had access to heavily-subsidised bank loans, thanks to asset price inflation. The hardest-hit have been pensioners, farmers and ordinary salary-earners who did not have the courage, or the means, to borrow and speculate.

Asset price inflation has transformed many city suburbs into factories, shopping malls, or residential high-rises. The dramatic change has made many villagers suddenly wealthy, but they do not know what to do with the wealth. On the one hand, they engage in speculation, gambling, and ostentatious consumption, burning through newly minted millions. On the other hand, they are too rich and too unskilled to be employed in any industry or service sector, despite having just lost their farms.

At a recent investment seminar in Beijing, I asked the audience what their "Chinese dreams" were. The first respondent replied: "I want to become the secretary of the Communist Party in my city." That got a big laugh from his fellow investors.

Against growing evidence on who gets ahead and how, I am not the only parent to find it hard to preach the virtues of saving to children. And I am often met with rebuttals from our own children. Should we start to teach them to bet their last yuan on real estate or the stock market and have them become corrupt politicians?

Joe Zhang, the author of Inside China's Shadow Banking: The Next Subprime Crisis?, is chairman of Wansui Micro Credit in Guangzhou