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Understanding High Saving Rate in China

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  • Xinhua He
  • Yongfu Cao

Abstract

This paper presents a detailed analysis of the Chinese saving rate based on the flow of funds data. It finds that the most widely adopted view of precautionary saving, which is regarded as the top reason for maintaining a high saving rate in China, is misleading because this conclusion is drawn from the household survey data. In fact, the household saving rate has declined dramatically since the mid-1990s, as is observed from the flow of funds framework. The high national saving rate is attributed to the increasing shares of both government and corporation disposable incomes. Insufficient consumption demand is caused by the persistent decrease in percentage share of household to national disposable income. Government- directed income redistribution urgently needs to be improved to accelerate consumption, which in turn would make the Chinese economy less investment-led and help to reduce the current account surplus. Copyright The official journal of The Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS) 2007.

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Bibliographic Info

Article provided by Institute of World Economics and Politics, Chinese Academy of Social Sciences in its journal China & World Economy.

Volume (Year): 15 (2007)
Issue (Month): 1 ()
Pages: 1-13

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Handle: RePEc:bla:chinae:v:15:y:2007:i:1:p:1-13

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Cited by:
  1. Riccardo Fiorentini, 2011. "Global Imbalances, the International Crisis and the Role of the Dollar," Working Papers 18/2011, University of Verona, Department of Economics.
  2. 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.
  3. Xin Wang & Yi Wen, 2011. "Can rising housing prices explain China’s high household saving rate?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 67-88.
  4. John Knight & Wei Wang, 2011. "China’s Macroeconomic Imbalances: Causes and Consequences," The World Economy, Wiley Blackwell, vol. 34(9), pages 1476-1506, 09.
  5. Yang, Dennis T. & Zhang, Junsen & Zhou, Shaojie, 2011. "Why Are Saving Rates So High in China?," IZA Discussion Papers 5465, Institute for the Study of Labor (IZA).
  6. Jean-Paul Fitoussi & Francesco Saraceno, 2008. "The intergenerational content of social spending : health care and sustainable growth in China," Sciences Po publications 2008-27, Sciences Po.
  7. Benner, Maximilian, 2010. "Exportinduziertes Wachstum als Chance für die „nächsten Tiger“?
    [Export-led growth as a chance for the “next tigers”?]
    ," MPRA Paper 40744, University Library of Munich, Germany.
  8. Ricardo Molero Simarro, 2011. "Functional Distribution of Income and Economic Growth in the Chinese Economy, 1978-2007," Working Papers 168, Department of Economics, SOAS, University of London, UK.
  9. repec:spo:wpecon:info:hdl:2441/6741 is not listed on IDEAS

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