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China’s High Saving Rate: Myth and Reality

Listed author(s):
  • Guonan Ma
  • Wang Yi

China’s saving rate is high from many perspectives – historical experience, international standards and model predictions. Furthermore, the average saving rate has been rising over time, with much of the increase taking place in the 2000s. What sets China apart from the rest of the world is that its rising aggregate saving has reflected high savings rates in all three sectors – corporate, household and government. Our evidence casts doubt on the proposition that distortions and subsidies account for China’s high saving rate. Instead, we argue that tough corporate restructuring (including pension and home ownership reforms), a marked Lewis-model transformation process (where the average wage exceeds the marginal product of labour in the subsistence sector) and rapid ageing process have all played more important roles. Such structural factors suggest that the Chinese saving rate may peak in the medium term.

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File URL: http://www.sciencedirect.com/science/article/pii/S2110701713600281
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Article provided by CEPII research center in its journal International Economics.

Volume (Year): (2010)
Issue (Month): 122 ()
Pages: 5-39

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Handle: RePEc:cii:cepiie:2010-q2-122-1
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  1. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2010. "China's Current Account and Exchange Rate," NBER Chapters,in: China's Growing Role in World Trade, pages 231-271 National Bureau of Economic Research, Inc.
  2. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
  3. Feng, Jin & He, Lixin & Sato, Hiroshi, 2011. "Public pension and household saving: Evidence from urban China," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 470-485.
  4. Richard Herd & Hu-Wei Hu & Vincent Koen, 2010. "Providing Greater Old-Age Security in China," OECD Economics Department Working Papers 750, OECD Publishing.
  5. Jha, Shikha & Prasad, Eswar & Terada-Hagiwara, Akiko, 2009. "Saving in Asia: Issues for Rebalancing Growth," ADB Economics Working Paper Series 162, Asian Development Bank.
  6. Felix Salditt & Peter Whiteford & Willem Adema, 2007. "Pension Reform in China: Progress and Prospects," OECD Social, Employment and Migration Working Papers 53, OECD Publishing.
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