Shortly after the collapse of Lehman Brothers in 2008 brought the global financial crisis to a peak, US economists including Harvard professor Kenneth Rogoff began to ask how things had gone so wrong. A key finding was that emerging markets, led by China, had "saved too much", making it possible for the United States to borrow cheaply.
That was contested by the Chinese government, which argued there were historical and cultural reasons for China's high savings rate. In a speech in 2009, central bank governor Zhou Xiaochuan said Chinese "valued thrift" and opposed extravagance, and that Chinese families had to save a lot because the health care and pension systems were underdeveloped.
Since then, however, China's massive money supply, urbanisation and a mortgage loan boom have resulted in a hefty rise in household debt, which is now equivalent to 44.4 per cent of national gross domestic product, triple the level in 2008, according to the Bank for International Settlements.
The net savings of Chinese households, defined as total outstanding deposits minus total outstanding loans, have stagnated or even begun to fall, showing that Chinese people are saving less and borrowing more.
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Although China's household debt level is still low compared to the 79.5 per cent of GDP in the US and 62.5 per cent in Japan, it has risen too steeply to be safe, according to a research report by the Institute for Advanced Research at Shanghai University of Finance and Economics which was published last month and led by former central bank statistics chief Sheng Songcheng.
"The speed of China's household debt accumulation ... has exceeded that of US household debt accumulation before the subprime crisis," it said, warning that the rapid growth would squeeze consumer spending and might lead to dangerous scenarios.
"As early as in 2020, the ratio of mortgage payments and disposable incomes in China will match the peak level in the US before the financial crisis," it concluded, adding that the rising debt burden would "restrict China's economic growth to some extent".
Cao and her husband are rich on paper: their flat is now worth more than 5 million yuan, but they still live in a frugal life. They've let the flat out 6,000 yuan a month and she lived with her husband at his army quarters. To make sure they can repay their debts and make ends meet, she has minimised discretionary spending on restaurant meals, clothing and travel.
The impact of rising household debt has been most obvious in China's major, tier-one cities, where property prices are chasing those in Hong Kong, London and New York. Uniqlo, a mass-market Japanese casual wear brand, is now a favourite of middle class Chinese, who also shop online in search of bargains.
Meanwhile, property has become the only reliable investment channel in China.
"Property has become a de facto carrier of wealth in China ... and the ultimate choice for investors given its high return in the past decades," said Jin Li, deputy dean of Peking University's Guanghua School of Management.
That's lifted China's rate of private property ownership to 89.68 per cent according to a survey by Chengdu's Southwestern University of Finance and Economics – among the highest in the world and up from close to zero two decades ago. By way of comparison the rate in the US is only 65 per cent and that in Japan just 60 per cent.