Chinese Millennials Have Purchasing Freedom U.S. Counterparts Lack

Retail and Consumer Confidence
10/10/2016 12:01

Helen H. Wang, an award-winning author and expert on China’s middle class, writes for Forbes that Chinese millennials, in addition to their burgeoning numbers (by 2020, Chinese millennials are expected to reach 300 million strong, compared to 80 million in the U.S.) have two distinct advantages over their U.S. counterparts: no student loan debt and no housing expenses. According to China National Administration of Tourism, writes Wang, more than 120 million Chinese traveled abroad in 2015, spending $194 billion. About half of those Chinese travelers were millennials - born after the 1980 - and they accounted for two-thirds of Chinese outbound travel spending. They may not all be wealthy, but they do have the freedom to spend their available cash.

"First," writes Wang, "Chinese millennials aren’t indebted with student loans. Chinese parents save and spend as much as it takes to send their children to college ... The average cost of tuition is $2,200 per year - relatively affordable to Chinese families. In addition, Chinese culture shuns borrowing. Student loans are unheard of and unavailable. This is very different from the American millennial generation. Those in their 20s are overwhelmed with student loans. More than seven million student borrowers are in default and millions are still struggling to repay their loans." Secondly, most Chinese millennials do not have housing expenses. Affordable housing is available - and paid in cash - to middle class families, so much so that financing homes with mortgages is uncommon. This is certainly a luxury most young Americans do not have. Couple these advantages with the fact that most Chinese millennials are their parents' only child and can avail of their disposable income.

Altogether, "That is why Chinese millennials are spenders. Without student loans and mortgages that typically burden Western millennials, Chinese young people spend all of their incomes. Recent research by Professor Michele Geraci at Zhejiang University shows that Chinese under 35 save nothing." However, Wang does not necessarily see this a boon to the luxury goods sector. "Unlike their parents’ generation, they are less ostentatious and won’t spend several months’ income to buy a Louis Vutton bag."