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Bank deposit withers away over 44 years

In most countries, a bank deposit would accumulate a fortune over 44 years. In China, not so much.

10·01·2017

Imagine you come across an old bank slip, for a 1,200 yuan deposit—made 44 years ago. Think about all the interest accumulating over all those years! You’ve hit the jackpot, right?

Sadly not. When 72-year-old retiree Ye Cuiying went to a bank in Fujian province, clutching her slip and expecting the motherlode of interest payments, she found that 44 years of inflation had basically only doubled the value of her deposit in raw numbers. Her account was now worth 2,684 yuan.

Indeed, currency fluctuation, and the state-owned banks’ notoriously stingy interest rates, meant that she can actually buy much less with the current amount than she could with 1,200 yuan back in 1973. Even in terms of USD value, the 1973 figure was worth $600 at that time, compared to just $400 today.

Whichever way you cut it, a basic bank deposit is a terrible investment. Not to mention the fact that the Cultural Revolution was still going on in 1973, so money back then would have been incredibly useful. Ye’s salary as a doctor at the time was just 40 yuan per month. Today, even the most poorly paid doctors, working out in remote regions, can expect at least 1,000 yuan per month, and salaries that low these days are relative rare: urban doctors receive several times that. Ye almost certainly could make more than that 2,684 yuan in one month working at her former hospital in Chengdu.

It’s a salutary lesson in some of the reasons why the Chinese economy functions very differently to Western economies, and why investments in China don’t always follow the same rules. While a bank deposit may seem like the safest investment to a Western observer, it makes no sense in the Chinese context—hence the prevalence of risky investments in dubious property schemes promising sky-high returns. After all: What are the safer options?

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