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How will China's saving-investment balance evolve ?

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  • Kuijs, Louis
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    Abstract

    This paper investigates how China's saving, investment, and saving-investment balance will evolvein the decades ahead. Household saving in China is relatively high compared with OECD countries. However, much of China's high economywide saving, and the difference between China and other countries, are due to unusually high enterprise and government saving. Moreover, cross-country empirical analysis shows that economywide saving and investment in China are higher than what would be expected, even adjusting for differences in economic structure. Combined, these findings suggest that much of China's high saving is the result of policies particular to China. Looking ahead, the econometric results suggest that purely on the basis of projected structural developments-including development, changes in economic structure, urbanization, and demographics-saving and investment would both decline only mildly in the coming two decades, with ambiguous impact on the current account surplus. However, the potential effect on saving, investment, and the saving-investment balance of several policy adjustments could be large. Several of these policies are identified and their likely impact assessed and quantified. This exercise suggests that rebalancing along these lines should reduce both saving and the current account surplus over time, although the surplus is unlikely to turn into a deficit soon.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3958.

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    Date of creation: 01 Jul 2006
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    Handle: RePEc:wbk:wbrwps:3958

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    Keywords: Economic Theory&Research; Investment and Investment Climate; Economic Investment&Savings; Non Bank Financial Institutions; Contractual Savings;

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    1. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take us to Dinner? - Simulating the Transition Paths of the U.S., Eu, Japan and China," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series, Boston University - Department of Economics dp-151, Boston University - Department of Economics.
    2. Chow, Gregory C., 1993. "How and why China succeeded in her economic reform," China Economic Review, Elsevier, Elsevier, vol. 4(2), pages 117-128.
    3. LAN LU & IAN M. McDONALD, 2006. "Does China Save Too Much?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 51(03), pages 283-301.
    4. Mohsin S. Khan & Zuliu Hu, 1996. "Why is China Growing so Fast?," IMF Working Papers, International Monetary Fund 96/75, International Monetary Fund.
    5. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    6. Kuijs, Louis, 2005. "Investment and saving in China," Policy Research Working Paper Series, The World Bank 3633, The World Bank.
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    Cited by:
    1. Kai Liu & Marcos Chamon & Eswar Prasad, 2010. "Income Uncertainty and Household Savings in China," IMF Working Papers, International Monetary Fund 10/289, International Monetary Fund.
    2. Thierry Apoteker, 2009. "La Chine : accélération des transformations et nouveaux défis," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 95(2), pages 207-228.
    3. Gu, Xinhua & Tam, Pui Sun, 2013. "The saving–growth–inequality triangle in China," Economic Modelling, Elsevier, Elsevier, vol. 33(C), pages 850-857.
    4. Lipschitz, Leslie & Rochon, Céline & Verdier, Geneviève, 2011. "A real model of transitional growth and competitiveness in China," Journal of Asian Economics, Elsevier, Elsevier, vol. 22(4), pages 267-283, August.
    5. Rod Tyers & Iain Bain, 2008. "American And European Financial Shocks: Implications For Chinese Economic Performance," CAMA Working Papers 2008-08, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. Zheng, Jinghai & Bigsten, Arne & Hu, Angang, 2006. "Can China’s Growth be Sustained? A Productivity Perspective," Working Papers in Economics, University of Gothenburg, Department of Economics 236, University of Gothenburg, Department of Economics.
    7. Arslan Razmi & Martin Rapetti & Peter Skott, 2011. "The Real Exchange Rate and Economic Development," UMASS Amherst Economics Working Papers, University of Massachusetts Amherst, Department of Economics 2011-08, University of Massachusetts Amherst, Department of Economics.
    8. Zaiter Lahimer, Mahjouba, 2011. "L’impact des entrées de capitaux privés sur la croissance économique dans les pays en développement," Economics Thesis from University Paris Dauphine, Paris Dauphine University, Paris Dauphine University, number 123456789/7670 edited by Sterdyniak, Henri.
    9. Leslie Lipschitz & Geneviève Verdier & Céline Rochon, 2008. "A Real Model of Transitional Growth and Competitiveness in China," IMF Working Papers, International Monetary Fund 08/99, International Monetary Fund.
    10. Chao, Chi-Chur & Laffargue, Jean-Pierre & Yu, Eden, 2011. "The Chinese saving puzzle and the life-cycle hypothesis: A revaluation," China Economic Review, Elsevier, Elsevier, vol. 22(1), pages 108-120, March.
    11. Marcelo José Braga Nonnenberg, 2010. "China: Estabilidade e Crescimento Econômico," Discussion Papers, Instituto de Pesquisa Econômica Aplicada - IPEA 1470, Instituto de Pesquisa Econômica Aplicada - IPEA.

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