Most rural Chinese don't know what a credit card is. Yet, to make up for a drop in exports, the Chinese government is encouraging the population to spend to stimulate the economy. They may want to look to South Korea and temper their approach.
In 1999, S. Korea's government worked to get their tightfisted population to borrow and spend to grow the domestic economy. By 2003, S. Korean households had a $2,000 debt average.
Today, at 66% of gross domestic product, S. Korea's household debt is one of the largest in the world. The good news is the delinquency rate is low, a mere 0.5%.
Confucian influenced societies are proud of their habit of saving, and the disgrace of debt is enormous. Chinese farmers compete over who can save more of their income, sometimes saving two-thirds to one-half of their $2,200 annual income.
It'll be interesting to see how vigorously China approaches credit and spending as their economy contracts.
Sources:
http://www.time.com/time/magazine/article/0,9171,552170,00.html
http://www.nytimes.com/2008/12/03/world/asia/03china.html
Wall Street Journal, November 29-30, 2008, p. A5.
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