Pandemic to hit US families harder

By Xie Jun Source:Global Times Published: 2020/3/30 20:43:40

Many have heavy debt, lack savings like Chinese

People shop at a supermarket in Xiaogan, central China's Hubei Province, March 25, 2020. (Photo/China News Service)

The coronavirus pandemic will hit US families in a much harsher way than Chinese households, although many Chinese families will also encounter financial difficulties as a result of the knock-on effects, such as slashed personal income, analysts say. 

This is mainly due to the difference between Chinese and US households in terms of cash reserves, as US individuals have fewer savings but more debts compared with Chinese. 

The US has overtaken China as the country with the largest number of coronavirus infections, with 136,300 Americans testing positive for the virus as of press time. The virus has infected 82,505 people in China.

Meanwhile, as the US is scrambling to stem the virus, China is also struggling to smooth out the lingering effects of the coronavirus on its economy, particularly stifled market demand, which would corner Chinese families financially. 

"Some Chinese families would become financially vulnerable after the coronavirus, as they will face mounting pressure to repay debts with their dropping incomes," said Lv Xueliang, a professor at Qingdao University. 

Wang Yifei, a native of Central China's Henan Province who tested positive for the virus, is from one of those families. Wang, a designer, said that his company paid him 70 percent of his original salary, about 7,000 yuan ($987), during his 20-day treatment in a hospital. 

"My family is in an embarrassing situation now, as we need to pay 6,000 yuan on mortgages each month," he told the Global Times, adding that his family has only savings of a few thousands of yuan after buying a house last year. 

A recent survey of 3,000 people conducted by the Survey and Research Center for China Household Finance under the Southwestern University of Finance and Economics showed that 60 percent of the respondents said they were poorer because of the pandemic, according to data provided by Wu Yu, deputy director of the institution. 

"The data showed that a sizable number of Chinese families should face liquidity problems temporarily, but I wouldn't call it a crisis because many of them have back-up assets," Wu told the Global Times.

However, experts said that the debt level of Chinese households is safe in general, and they can handle financial risks better than their US counterparts when the coronavirus assault leads to steep drop in family incomes. 

China's household debt amounted to about 54 trillion yuan in 2018, equivalent to 60 percent of its GDP. In comparison, household debt in the US accounted for about 76 percent of GDP in 2019. 

The debt/income ratio of Chinese households amounted to 90.2 percent in 2018, according to a report published by the Southwestern University of Finance and Economics. The same ratio in the US hit 105 percent in 2018. 

According to Lv, US households are much more financially vulnerable to the pandemic than Chinese families, as the majority of American people do not save money in the banks, and they often borrow from their credit cards and have other short-term debts.

The personal saving rate in the US was merely 7.9 percent in January, while Chinese people have a saving rate of 45 percent, the highest in the world, according to Zhou Xiaochuan, former governor of the central bank.
Newspaper headline: Virus to hit US households


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