6 Most Disastrous Financial Woes Eroding Chinese People’s Wealth

October 7, 2013 Updated: October 7, 2013

According to a survey in the Wall Street Journal, the richest 10 percent of households in China controlled 86.7 percent of total wealth in 2011. Similarly, a report released by the World Bank states that 130 million people in China have to survive on less than one U.S. dollar a day.

Netizens in China recently identified the six most disastrous ways Chinese people suffer financial loss in their country, including stock market turmoil, corruption, and “red envelopes.”

1. Stock Market

Statistics show that China’s stock market underwent 26 price hikes within a 20-year span between May 1991 and May 2011. Meanwhile, the secondary market suffered a 30 percent loss, which is equivalent to 2 trillion yuan (US$320 billion) of accumulative loss.

A veteran investor going by “Sharp Grandpa” said that his 20-year investment experience in China’s stock market boils down to one word—rage.

He has another word, darkness, to describe China’s stock market, saying, “China’s stock market is 10 or even 100 times darker than its professional soccer league—misappropriating money anywhere it can.”

2. Bank Savings

China’s National Bureau of Statistics reported that the CPI (Consumer Price Index) increased 5.4 percent in 2011. Comparing that to the latest interest rate for a one-year term CD at 3.5 percent, the actual interest rate is negative 1.9 percent.

In an episode widely distributed on the Internet, Tan, an elderly woman from Sichuan Province, deposited 400 yuan (US$64) in a bank in 1977. At that time, this money could buy an apartment. Thirty-three years later, the deposit only generated 438 yuan (US$70) of interest. After taxes of 2.36 yuan (US$0.4) were deducted, the total amount Tan received was 836 yuan (US$137)—just enough for a bottle of Maotai, a famous Chinese liquor.

In the early 1970s, 10 yuan (US$1.6) could buy 14.3 pounds of pork. Nowadays, it can barely buy one pound of pork. In 1976, the monthly wage of a blue-color worker was 39 yuan (US$6.4). Today, this wage cannot cover the cost of living in a major Chinese city for one day.

3. Illness

The cost of medicines in China are among the highest in the world. A recent survey conducted by state-owned media People’s Daily indicates that numerous patented drugs are marketed in Hong Kong and China with a substantial price difference. For example, Herceptin, a drug for breast cancer treatment, costs 24,500 yuan (US$4,002) per dose in China, while the same prescription in Hong Kong costs only 14,800 yuan (US$2,418).

In a report by Beijing Business Today, an executive of a drug company in Beijing was quoted as saying, “When calculating drug prices, operating costs and bribery make up about 20 to 30 percent of the selling price.”

4. Retirement Plans

According to Sohu Business, a financial commentator said that China has the highest pension plan premiums in the world.

Some Chinese call China’s social insurance a Ponzi scheme. Chinese citizens don’t qualify for pension benefits until they have paid premiums for at least 15 years. So, you have to stick with the same job for 15 years. But this can be impossible for people working out of town; they may be paying into a plan but getting nothing in return.

5. Fraud

Fraud is rampant in China; it takes 300 billion yuan (US$49 billion) from the Chinese people each year according to share.inside.com.

In Hangzhou City alone, nine cases of mobile phone text message frauds, involving 5.44 million yuan (US$889,000) of illegal profits, occurred in one day. Total profits generated through fraudulent text messaging amounts to 20 billion yuan (US$3.3 billion) per year.

Seven thousand illegal companies in China are involved in financial investments. Over half of them have bilked the Chinese people of 45 billion yuan (US$7.4 billion).

6. Bribes

Traditionally, Chinese people believed that one’s good fortune is not entirely due to one’s personal efforts, and one should share the blessings received in life, thus, the custom to give away money in red envelopes to friends and relatives to express one’s appreciation. But nowadays, to make a living in China, people have to prepare red envelopes for all matters, including getting married, having a baby, moving, getting a promotion, being enrolled in school, or hospitalized.

Xinmin Evening News, another communist Party mouthpiece, reported that a resident in Shanghai received and accepted 10 invitations last year during the October holidays. After giving 400 yuan (US$65) to each host, his wages for the month were gone.

A report on Modern Express told of a man named Shi from Nanjing, who has six sisters and 14 nephews and nieces. He dreads every Chinese New Year because he is expected to give a red envelope to each niece and nephew. Shi eventually called a family meeting and informed everyone that he was giving up the title of uncle.

Media statistics show that 60 percent of Chinese parents also dislike giving gifts to their children’s teachers. But in reality, 70 percent of them do it.

Researched by Hsin-Yi Lin, translated by Leo Chen. Written in English by Arleen Richards and Gisela Sommer.

Read the original Chinese article.