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The Chinese Corporate Savings Puzzle

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Author Info

  • Hui Tong
  • Shang-Jin Wei
  • Tamim Bayoumi

Abstract

China’s high corporate savings rate is commonly claimed to be a key driver for the country’s large current account surplus. The mainstream explanation for high corporate savings is a combination of windfall profits in state-owned firms, especially in resource sectors, and mis-governance of state-owned firms represented by their low dividend payout. The paper casts doubt on these views by comparing the savings of 1557 Chinese listed firms with those of 29330 listed firms from 51 other countries over 2002-07. First, Chinese firms do not have a significantly higher savings rate (as a share of total assets) than the global average because corporations in most countries have a high savings rate. The rising corporate savings rate is also consistent with a global trend. Second, there is no significant difference in the savings behavior and dividend patterns between Chinese majority state-owned and private listed firms, contrary to the received wisdom.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/275.

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Length: 32
Date of creation: 01 Dec 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/275

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Related research

Keywords: Corporate sector; Current account surpluses; Economic models; Private savings; Consumption; Production; Employment; savings rate; net savings; savings rates; dividend payout; savings behavior; capital expenditure; working capital;

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References

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  1. Hui Tong & Shang-Jin Wei, 2009. "The Composition Matters: Capital Inflows and Liquidity Crunch during a Global Economic Crisis," NBER Working Papers 15207, National Bureau of Economic Research, Inc.
  2. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers, Yale School of Management ysm123, Yale School of Management, revised 01 Mar 2001.
  3. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 119(3), pages 511 - 564.
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Cited by:
  1. Bonatti, Luigi & Fracasso, Andrea, 2013. "Regime switches in the Sino-American co-dependency: Growth and structural change in China," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 25(C), pages 1-32.
  2. Dennis Tao Yang & Junsen Zhang & Shaojie Zhou, 2010. "Why are Saving Rates so High in China?," Working Papers, Hong Kong Institute for Monetary Research 312010, Hong Kong Institute for Monetary Research.
  3. Dew, Ed & Martin, Jeremy & Giese, Julia & Zinna, Gabriele, 2011. "China's changing growth pattern," Bank of England Quarterly Bulletin, Bank of England, Bank of England, vol. 51(1), pages 49-56.
  4. Charles Yuji Horioka & Akiko Terada-Hagiwara, 2013. "Corporate Cash Holding in Asia," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0889, Institute of Social and Economic Research, Osaka University.
  5. Chamon, Marcos & Liu, Kai & Prasad, Eswar, 2013. "Income uncertainty and household savings in China," Journal of Development Economics, Elsevier, Elsevier, vol. 105(C), pages 164-177.
  6. Deng, Lu & Li, Sifei & Liao, Mingqing & Wu, Weixing, 2013. "Dividends, investment and cash flow uncertainty: Evidence from China," International Review of Economics & Finance, Elsevier, Elsevier, vol. 27(C), pages 112-124.

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