Do Chinese Lack A Sense of Value?

Over at Minyanville, Kristin Graham makes strong and sweeping statements against the Chinese, she writes, (bold emphasis mine)

First, the Chinese lack a sense of value. Wealth is accumulated rapidly and in many cases, without taking on much risk since the government stands by its people’s side. Real estate, frequently earned via unorthodox means, turns average workers into wealthy citizens without lifting a finger. The Chinese don’t always associate high income through hard work and therefore don’t value the ability to purchase a luxury item.

Second, the lack of a distributed class system results in a consumer market where you’re either too poor to afford premium goods and services or you’re so wealthy that you can afford just about anything. With no scale of wealth, consumers do not gradually get priced out of the market as prices rise.

Third, the Chinese tend to view a direct connection between price and quality. The higher the price, the better the product. The best example is the housing market: structurally poor apartment buildings that deteriorate at rapid rates continue to escalate in value. The quality of the inside of an apartment is rarely a determining factor of its market value.

Lastly, wealthy Chinese are very materialistic and status oriented. This has a lot to do with the fact that China is all new money. For example, a young co-worker’s parents purchased her a car a few months back. She claimed she didn’t have a driver’s license and was unsure what she should actually do with the car. It was purchased purely for the fact she could say she owned it.

A recent quote from a Chinese dating game show, “I’d rather be miserable sitting in BMW rather than happy on a bicycle”, sums up the Chinese mentality.

Clearly, the Chinese mindset is far different than in the US. Regardless of level of wealth, most rich Americans will think twice before a purchase and evaluate the value of what they are paying for goods or services. In China, money is spent with little to no consideration of value. It’s spent because it can be spent.

My comments:

“Lacking a sense of value” does not seem to be the appropriate phrase here.

When people take action that ignores “risk”, based on the expectation that “government stands by its people’s side”, this is known as “moral hazard”, a common feature seen in economic bubbles.

And moral hazard doesn’t make the Chinese any different from the Americans who were the epicentre of the worldwide tremors felt from the most recent US housing bubble crash.

From Wikipedia.org

Besides, it isn’t just the Chinese who “became materialistic and status oriented”, as Americans levered up their houses just to speculate on McMansions and SUVs.

McMansions as defined by Urban Dictionary, is “the epitome of waste in America, and is nothing more than a status symbol for many pretentious suburban Americans who work to death trying to pay the mortgage and keep up with the Jones'.” (emphasis added)

So it isn’t the just the Chinese who seem to have lost their sense of values or where demand and supply appears “inelastic” but likewise the Americans, or for that matter, anyone else experiencing the narcotic effect of a blossoming bubble episode.

In other words, bubbles are not limited by national identity, as these signify as the sociological sideeffects of government or politically based policies.

In bubbles, what would appear irrational would look like the norm, that’s because mob psychology would be dominant enough to transform what seems rational to losing “contact with reality”. And that’s precisely what the writer has been witnessing in angst.

The bubble cycle in China has been palpable enough such that a poll recently revealed that 45% of global investors expect a bust within the next the 5 years. I share this conviction.

Unfortunately, instead of objectively examining the unfolding events, the writer applies undeservingly self-righteous prejudices.