What can Chinese best learn from my country?

• Source: Global Times
• [01:31 December 22 2009]
• Comments

Joseph Kirschke, a Beijingbased freelance writer from the US who specializes in international a. airs and current events

Proper use of credit

In promoting China's growth, Beijing has encouraged the use of credit cards to foster consumption for a nation long inclined, for historical and cultural reasons, toward savings. Indeed, some 2 million Chinese people own cards, a number that has more than tripled since 2006.

But Beijing is now battling its own "bubble." Although cash reins in the former Middle Kingdom, with Chinese families saving more of their income, some 40 percent, than anywhere else, far too many are learning the hefty, longterm consequences of easy access to credit. If they want to see the consequences, they need only look to the US. In 2001, the US was the world's biggest creditor nation.

Eight years, two wars and many ruinous policies later, the Bush administration may have swelled the national debt by $4 trillion.

Amid this fake growth, credit card use was overencouraged until it spun out of control. Accompanied by a creaky real estate boom, Americans gradually saw their incomes decline against a soaring cost of living.

Before long, many Americans, some accustomed to a way of life that they weren't altogether prepared to give up, relied on their multiple credit cards more than ever. Then, as jobs began to vanish, many more people found themselves using plastic just to get by.

As interest rates and late fees piled sky-high along with a massive wave of home foreclosures, the bottom fell out, and the rest is sad history.

The consequences of treating the world's greatest economy like a casino has devastated not just the US, but much of the world beyond.

These are just a few things for Chinese policymakers to think about when they regulate credit card companies.