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China's high savings: Drivers, prospects, and policy implications

Author

Listed:
  • Zhang, Longmei
  • Brooks, Ray
  • Ding, Ding
  • Ding, Haiyan
  • He, Hui
  • Lu, Jing
  • Mano, Rui C.

Abstract

China's national savings rate—one of the highest in the world—is at the heart of its internal/external imbalances. High savings finance elevated investment when held domestically, or led to large global imbalances when they flowed abroad. We find that high savings emanate mostly from the household sector, resulting from demographic changes induced by the one-child policy and the transformation of the social safety net and job security that occurred during the transition from centrally planned to market economy. Housing reform and rising income inequality also contributed to higher savings. Moving forward, demographic changes will put downward pressure on savings. Policy efforts in strengthening the social safety net and reducing income inequality are also needed to reduce savings further and boost consumption.

Suggested Citation

  • Zhang, Longmei & Brooks, Ray & Ding, Ding & Ding, Haiyan & He, Hui & Lu, Jing & Mano, Rui C., 2025. "China's high savings: Drivers, prospects, and policy implications," Emerging Markets Review, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:ememar:v:69:y:2025:i:c:s1566014125001049
    DOI: 10.1016/j.ememar.2025.101355
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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