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Why Are Saving Rates So High in China?

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Author Info

  • Yang, Dennis T

    ()
    (University of Virginia)

  • Zhang, Junsen

    ()
    (Chinese University of Hong Kong)

  • Zhou, Shaojie

    ()
    (Tsinghua University)

Abstract

In this paper, we define "The Chinese Saving Puzzle" as the persistently high national saving rate at 34-53 percent of gross domestic product (GDP) in the past three decades and a surge in the saving rate by 11 percentage points from 2000-2008. Using data from the Flow of Funds Accounts (FFA) and Urban Household Surveys (UHS) supplemented by the findings from existing studies, we analyze the sources and causes of China's high and rising saving rates in the government, corporate, and household sectors. Although the causes of China's high saving are complex, we suggest that the evolving economic, demographic, and policy trends in the internal and external environments of the Chinese economy will likely lead to a decline in national saving in the foreseeable future.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5465.

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Length: 49 pages
Date of creation: Jan 2011
Date of revision:
Publication status: published in: Joseph Fan and Randall Morck (eds.), 2012, Capitalizing China. University of Chicago Press, 249-282
Handle: RePEc:iza:izadps:dp5465

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Keywords: international comparison; aggregate saving; demographic structure; household behavior; China;

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References

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  1. DennisTao Yang & VivianWeijia Chen & Ryan Monarch, 2010. "Rising Wages: Has China Lost Its Global Labor Advantage?," Pacific Economic Review, Wiley Blackwell, vol. 15(4), pages 482-504, October.
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  12. Guonan Ma & Wang Yi, 2010. "China's high saving rate: myth and reality," BIS Working Papers 312, Bank for International Settlements.
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  16. Bai, Chong-En & Lu, Jiangyong & Tao, Zhigang, 2009. "How does privatization work in China?," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 453-470, September.
  17. 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, vol. 119(3), pages 511 - 564.
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Citations

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Cited by:
  1. Etienne Farvaque & Alexander Mihailov & Alireza Naghavi, 2011. "The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency," Center for Economic Research (RECent) 066, University of Modena and Reggio E., Dept. of Economics.
  2. Yang, Dennis T, 2012. "Aggregate Savings and External Imbalances in China," IZA Discussion Papers 6964, Institute for the Study of Labor (IZA).
  3. Joseph Fan & Randall Morck & Bernard Yeung, 2011. "Capitalizing China," NBER Working Papers 17687, National Bureau of Economic Research, Inc.
  4. Ge, Suqin & Yang, Dennis T & Zhang, Junsen, 2012. "Population Policies, Demographic Structural Changes, and the Chinese Household Saving Puzzle," IZA Discussion Papers 7026, Institute for the Study of Labor (IZA).
  5. David Backus & Thomas Cooley & Espen Henriksen, 2013. "Demography and Low-Frequency Capital Flows," NBER Chapters, in: NBER International Seminar on Macroeconomics 2013, pages 94-102 National Bureau of Economic Research, Inc.
  6. Bacchetta, Philippe & Benhima, Kenza & Kalantzis, Yannick, 2012. "Capital Controls with International Reserve Accumulation: Can this Be Optimal?," Working Papers 2012-009, Banco Central de Reserva del Perú.
  7. Keyu Jin & Stéphane Guibaud & Nicolas Coeurdacier, 2013. "Credit constraints and growth in a global economy," LSE Research Online Documents on Economics 54261, London School of Economics and Political Science, LSE Library.
  8. Bussière, Matthieu & Kalantzis, Yannick & Lafarguette, Romain & Sicular, Terry, 2013. "Understanding household savings in China: the role of the housing market and borrowing constraints," MPRA Paper 44611, University Library of Munich, Germany.
  9. Riccardo Fiorentini, 2011. "Global Imbalances, the International Crisis and the Role of the Dollar," Working Papers 18/2011, University of Verona, Department of Economics.
  10. Skold, Alida S., 2011. "Overview of the Evolution of China's Central Bank and Monetary Policy: Correlation to the European Union," MPRA Paper 33608, University Library of Munich, Germany.
  11. Bacchetta, P. & Benhima, K. & Kalantzis, Y., 2013. "Optimal Exchange Rate Policy in a Growing Semi-Open Economy," Working papers 452, Banque de France.

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