Beijing Residents Rush to Banks to Buy State Bonds

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Last updated at: (Beijing Time) Sunday, March 02, 2003

Beijing Residents Rush to Banks to Buy State Bonds

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Elderly and middle-aged people in Beijing might have been reminded of the days of food rationing during the planned economy era when Beijingers lined up in front of banks last week to buy 60 billion yuan (7.23 billion US dollars) in state bonds.

"I rushed to seven banks only to find that all the bonds had been sold," 62-year-old Beijing resident Zhu Yaxiong complained.

His neighbor, 42-year-old Fan Hongjiang, a state-owned enterprise employee, was more fortunate.

"In order to buy 10,000 yuan (1,205 US dollars) worth of state bonds, I lined up at six in the morning," Fan said, "Imagine, the state had to mobilize people to buy the bonds 10 years ago!"

The Ministry of Finance plans to issue 60 billion yuan in state bonds in 2003, with three-year state bonds reaching 30 billion yuan at 2.32 percent annual interest rate and another 30 billion yuan six-year bonds at 2.63 percent interest rate.

"The state bonds sell well, and more than 1 million yuan (120.482 US dollars) went within one hour," said a bank employee on Xisi Street, Beijing, who preferred not to be named. She added, "Most of our customers are elderly or middle-aged people."

"It's better to purchase state bonds than to deposit our money in banks because the interest income from state bonds is tax-free," Zhu said.

The notion that it is shameful to borrow money is still deeply rooted among many Chinese. Maintaining savings accounts in banks remains the most popular investment for most Chinese people.

According to a report released earlier last month by the People's Bank of China, China's central bank, China's savings deposits stood at 9.81 trillion yuan (1.18 trillion US dollars) at the end of January 2003.

To date, the bulk of expenditures of China's urban households goes for education, housing and medical care.

"We won't have to worry about our kid's college tuition five years from now if we purchase the state bonds," said Fan, an employee of a state-owned enterprise.

"I have to set aside some money for the future since my enterprise is not going well," Fan said.

However, the purchase of state bonds may not be the best option for urban youth who consider purchasing on credit a fashion.

"If I have money, I will take out a loan to buy a house or a car at first," said a 24-year-old man named Zhang who has been working for two years.

"I prefer to seek opportunities in the stock market, given the long investment cycle of state bonds," he added.

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