Earn more, spend more: Chinese people’s financial outlook for 2017

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More than half of China’s population is confident of cashing in on the growth of the world’s second largest economy in 2017 - and they may be more willing to spend the extra money earned rather than saving for rainy days, a survey conducted by China Central Television found.

That’s good news for Chinese policymakers, who have set the national output goal for 2017 at 6.5 percent, slightly trimmed from last year.

MAKE MORE, SPEND MORE

Fifty-five percent of the 100,000 people surveyed anticipated that they will make more money by the end of 2017, with 13,000 envisioning a minimum increase of 20 percent on their total income in 2016.

With a more ambitious vision for their personal finances, people tend to favor riskier financial products that promise higher returns, the findings suggest.

One pattern that emerges from the results is that those with an appetite for riskier investments are more inclined to harbor a lavish spending plan, an indicator that probably makes Chinese policymakers’ hearts sing, as China is looking to ramp up consumption’s share of national output.

Domestic consumption contributed more than 60 percent of China’s GDP growth in 2016, Shen Danyang, spokesman for China’s Ministry of Commerce told CGTN.

On top of upgrading domestic goods, Chinese people are investing more in self-improvement - from advancing their careers to building up good health.

“Breaking the yoke of daily life to see the outside world”, China’s post-80s and 90s generations often declare. But the survey found that this philosophy may be shared by a more diversified demography. Regardless of their annual income, half the respondents said they would consider putting their money into spreading their wings.

POLICY IMPACT

China’s 1.3 billion people had an average disposable income of 23,821 yuan (3,369 US dollars) in 2016, according to China’s national statistics office. The year-on-year increase was 6.3 percent after deducting inflation, or 1,500 yuan. That amounts to 75 McDonald’s Big Macs, and is nearly at pace with China’s 6.7 percent GDP expansion in 2016.

But hurdles remain for people to keep more money in their pockets.

The first is the higher inflation target for 2017. It has been set at three percent, compared to an average of two percent achieved in 2016. This means that a share of income will likely be needed to cover rising prices rather than bettering life quality.

Housing prices are excluded from the CPI calculation, but the probability of an uptick again in 2017 is still hovering above property buyers’ heads. Together with anticipated expenditures such as healthcare and retirement, housing prices contribute hugely to a high domestic saving rate in China, which was estimated at 49 percent of the GDP in 2015, data from the World Bank showed.

The Chinese government will continue its effort to optimize a sustainable, healthy housing market, said Chinese Premier Li Keqiang last week in his government work report during China’s annual National People’s Congress convention.

For people relying mainly on salary rises to deepen their pockets, income tax changes will weigh in more heavily. Consumption will be taken into consideration in adjusting the minimum base for taxation, said Xiao Jie, China’s finance minister.

HAPPINESS CAN BE BOUGHT - TO A POINT

But the survey also suggests that the relationship between fortune and happiness is not always a straight upward line, but rather a curve when household total annual income exceeds 300,000 yuan (about 43,300 US dollars).

Lhasa, capital city of Tibet Autonomous Region, was the city with the highest rate of happiness, the survey found, whereas people feel less happy in the richest cities in China such as Beijing and Shanghai where the rates of happiness fell behind the national average.