Advanced Search
MyIDEAS: Login

Aggregate Savings and External Imbalances in China

Contents:

Author Info

  • Dennis Tao Yang

Abstract

Over the last decade, the internal and external macroeconomic imbalances in China have risen to unprecedented levels. In 2008, China's national savings rate soared to over 53 percent of its GDP, whereas its current account surplus exceeded 9 percent of GDP. This paper presents a unified framework for understanding the structural causes of these imbalances. I argue that the imbalances are attributable to a set of policies and institutions embedded in the economy. I propose a unified framework for understanding the joint causes of the high savings rate and external imbalances in China. My explanations first focus on an array of factors that encouraged saving across the corporate, government, and household sectors, such as policies that affected sectoral income distribution, along with factors like incomplete social welfare reforms, and population control policies. I then turn to policies that limited investment in China, thus preventing the high savings from being used domestically. Finally, I will examine how trade policies, such as export tax rebates, special economic zones, and exchange rate policies, strongly promote exports. Moreover, the accession of China to the World Trade Organization has dramatically amplified the effects of these structural distortions. In conclusion, I recommend some policy reforms for rebalancing the Chinese economy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.4.125
Download Restriction: no

Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 26 (2012)
Issue (Month): 4 (Fall)
Pages: 125-46

as in new window
Handle: RePEc:aea:jecper:v:26:y:2012:i:4:p:125-46

Note: DOI: 10.1257/jep.26.4.125
Contact details of provider:
Email:
Web page: http://www.aeaweb.org/jep/
More information through EDIRC

Order Information:
Web: http://www.aeaweb.org/subscribe.html

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dennis Tao Yang & Junsen Zhang & Shaojie Zhou, 2010. "Why are Saving Rates so High in China?," Working Papers 312010, Hong Kong Institute for Monetary Research.
  2. Liugang Sheng, 2013. "Did China diversify its foreign reserves?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(1), pages 102-125, 01.
  3. Charles Yuji Horioka & Junmin Wan, 2006. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," NBER Working Papers 12723, National Bureau of Economic Research, Inc.
  4. Zhang, Haiyan, 2008. "Corporate governance and dividend policy: A comparison of Chinese firms listed in Hong Kong and in the Mainland," China Economic Review, Elsevier, vol. 19(3), pages 437-459, September.
  5. Song, Zheng Michael & Storesletten, Kjetil & Zilibotti, Fabrizio, 2009. "Growing like China," CEPR Discussion Papers 7149, C.E.P.R. Discussion Papers.
  6. Morris Goldstein & Nicholas R. Lardy, 2009. "The Future of China's Exchange Rate Policy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa87.
  7. Giovanni Ferri & Li-Gang Liu, 2009. "Honor Thy Creditors Beforan Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?," Working Papers 162009, Hong Kong Institute for Monetary Research.
  8. Chamon, Marcos & Prasad, Eswar, 2007. "Why Are Saving Rates of Urban Households in China Rising?," IZA Discussion Papers 3191, Institute for the Study of Labor (IZA).
  9. Franco Modigliani & Shi Larry Cao, 2004. "The Chinese Saving Puzzle and the Life-Cycle Hypothesis," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 145-170, March.
  10. Ge, Suqin & Yang, Dennis T., 2012. "Changes in China's Wage Structure," IZA Discussion Papers 6492, Institute for the Study of Labor (IZA).
  11. Guonan Ma & Wang Yi, 2010. "China's high saving rate: myth and reality," BIS Working Papers 312, Bank for International Settlements.
  12. Shang-Jin Wei & Xiaobo Zhang, 2009. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," NBER Working Papers 15093, National Bureau of Economic Research, Inc.
  13. Knight, John & Wang, Wei, 2011. "China’s Macroeconomic Imbalances: Causes and Consequences," BOFIT Discussion Papers 15/2011, Bank of Finland, Institute for Economies in Transition.
  14. Ianchovichina, Elena, 2005. "Duty drawbacks, competitiveness, and growth - are duty drawbacks worth the hassle?," Policy Research Working Paper Series 3498, The World Bank.
  15. BAI, Chong-En & QIAN, Zhenjie, 2010. "The factor income distribution in China: 1978-2007," China Economic Review, Elsevier, vol. 21(4), pages 650-670, December.
  16. Aart Kraay, 2000. "Household Saving in China," World Bank Economic Review, World Bank Group, vol. 14(3), pages 545-570, September.
  17. Yiping Huang & Kunyu Tao, 2010. "Factor Market Distortion and the Current Account Surplus in China," Asian Economic Papers, MIT Press, vol. 9(3), pages 1-36, October.
  18. Guonan Ma & Haiwen Zhou, 2009. "China's Large and Rising Net Foreign Asset Position," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(5), pages 1-21.
  19. Chao, Chi-Chur & Yu, Eden S.H. & Yu, Wusheng, 2006. "China's import duty drawback and VAT rebate policies: A general equilibrium analysis," China Economic Review, Elsevier, vol. 17(4), pages 432-448.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mehlum, Halvor & Torsvik, Ragnar & Valente, Simone, 2013. "China's Savings Multiplier," Memorandum 17/2013, Oslo University, Department of Economics.
  2. Rod Tyers, 2014. "Analysing the Short Run Effects of China’s Economic Reform Agenda," CAMA Working Papers 2014-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Bonatti, Luigi & Fracasso, Andrea, 2014. "Modeling the Transition Towards Renminbi's Full Convertibility: Implications for China’s Growth," MPRA Paper 54129, University Library of Munich, Germany.
  4. Rod Tyers, 2014. "International Effects of China’s Rise and Transition: Neoclassical and Keynesian Perspectives," CAMA Working Papers 2014-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Ma, Guonan & Yang, Dennis T., 2013. "China's High Saving Puzzle," IZA Discussion Papers 7223, Institute for the Study of Labor (IZA).
  6. Stephane Guibaud & Keyu Jin & Nicolas Coeurdacier, 2011. "Credit Constraints and Growth in a Global Economy," 2011 Meeting Papers 1040, Society for Economic Dynamics.
  7. Julan Du & Hongsheng Fang & Xiangrong Jin, 2013. "Chinese Political and Economic Governance System and the Imbalance between Consumption and Investment," Working Papers 232013, Hong Kong Institute for Monetary Research.
  8. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  9. Sarlea Mihaela & Manta Stefan George & Vaidean Viorela Ligia, 2013. "The Role Of Savings Rate In Deepening Macroeconomic Imbalances In China," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1018-1027, July.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:26:y:2012:i:4:p:125-46. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.