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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.

Suggested Citation

  • Xinhua He & Yongfu Cao, 2007. "Understanding High Saving Rate in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(1), pages 1-13.
  • Handle: RePEc:bla:chinae:v:15:y:2007:i:1:p:1-13
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1749-124X.2007.00049.x
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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. Dayong Zhang & Yu Wu, 2012. "Household Savings, the Stock Market, and Economic Growth in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(2), pages 44-58, March.
    3. 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.
    4. Abhijit Banerjee & Xin Meng & Tommaso Porzio & Nancy Qian, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," Working Papers id:5799, eSocialSciences.
    5. Xie, Shiqing & Mo, Taiping, 2015. "Differences in corporate saving rates in China: Ownership, monopoly, and financial development," China Economic Review, Elsevier, vol. 33(C), pages 25-34.
    6. repec:eee:touman:v:32:y:2011:i:3:p:616-628 is not listed on IDEAS
    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. Dayong Zhang & Yu Wu, 2012. "Household Savings, the Stock Market, and Economic Growth in China," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(2), pages 44-58, March.
    9. John Knight & Wei Wang, 2011. "China’s Macroeconomic Imbalances: Causes and Consequences," The World Economy, Wiley Blackwell, vol. 34(9), pages 1476-1506, September.
    10. Tsai Chang-hsien, 2011. "International Jurisdictional Competition under Globalization: From the U.S. Regulation of Foreign Private Issuers to Taiwan's Restrictions on Outward Investment in Mainland China," Asian Journal of Law and Economics, De Gruyter, vol. 2(1), pages 1-102, April.
    11. Dennis Tao Yang & Junsen Zhang & Shaojie Zhou, 2012. "Why Are Saving Rates So High in China?," NBER Chapters,in: Capitalizing China, pages 249-278 National Bureau of Economic Research, Inc.
    12. 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.
    13. 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.
    14. repec:oup:indcch:v:26:y:2017:i:1:p:1-20. is not listed on IDEAS
    15. 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.
    16. repec:spo:wpecon:info:hdl:2441/6741 is not listed on IDEAS

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