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Why Are Saving Rates So High in China?

In: Capitalizing China

  • Dennis Tao Yang
  • Junsen Zhang
  • Shaojie Zhou

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 to 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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This chapter was published in:
  • Joseph Fan & Randall Morck, 2012. "Capitalizing China," NBER Books, National Bureau of Economic Research, Inc, number morc10-1, August.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12068.
    Handle: RePEc:nbr:nberch:12068
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Charles Yuji Horioka & Junmin Wan, 2006. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," NBER Working Papers 12723, National Bureau of Economic Research, Inc.
    2. Yang, Dennis T. & Chen, Vivian & Monarch, Ryan, 2010. "Rising Wages: Has China Lost Its Global Labor Advantage?," IZA Discussion Papers 5008, Institute for the Study of Labor (IZA).
    3. Giles, John & Park, Albert & Zhang, Juwei, 2005. "What is China's true unemployment rate?," China Economic Review, Elsevier, vol. 16(2), pages 149-170.
    4. Shang-Jin Wei & Xiaobo Zhang, 2009. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," NBER Working Papers 15093, National Bureau of Economic Research, Inc.
    5. 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.
    6. Franco Modigliani & Shi Larry Cao, 2004. "The Chinese Saving Puzzle and the Life-Cycle Hypothesis," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 145-170, March.
    7. Wang, Yan, 1995. "Permanent Income and Wealth Accumulation: A Cross-Sectional Study of Chinese Urban and Rural Households," Economic Development and Cultural Change, University of Chicago Press, vol. 43(3), pages 523-50, April.
    8. Giovanni Ferri & Li-Gang Liu, 2010. "Honor Thy Creditors Beforan Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?," Asian Economic Papers, MIT Press, vol. 9(3), pages 50-71, October.
    9. Chamon, Marcos & Prasad, Eswar, 2007. "Why Are Saving Rates of Urban Households in China Rising?," IZA Discussion Papers 3191, Institute for the Study of Labor (IZA).
    10. Hui Tong & Shang-Jin Wei & Tamim Bayoumi, 2010. "The Chinese Corporate Savings Puzzle; A Firm-Level Cross-Country Perspective," IMF Working Papers 10/275, International Monetary Fund.
    11. Chow, Gregory C, 1985. "A Model of Chinese National Income Determination," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 782-92, August.
    12. Ma, Guonan & Yang, Dennis T., 2013. "China's High Saving Puzzle," IZA Discussion Papers 7223, Institute for the Study of Labor (IZA).
    13. Meng, Xin, 2003. "Unemployment, consumption smoothing, and precautionary saving in urban China," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 465-485, September.
    14. Duo Qin, 2003. "Determinants of household savings in China and their role in quasi-money supply," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 513-537, 09.
    15. Guonan Ma & Wang Yi, 2010. "China's high saving rate: myth and reality," BIS Working Papers 312, Bank for International Settlements.
    16. Aart Kraay, 2000. "Household Saving in China," World Bank Economic Review, World Bank Group, vol. 14(3), pages 545-570, September.
    17. John Knight & Jinjun Xue, 2006. "How High is Urban Unemployment in China?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 4(2), pages 91-107.
    18. Lee, Jong-Wha & Hong, Kiseok, 2012. "Economic growth in Asia: Determinants and prospects," Japan and the World Economy, Elsevier, vol. 24(2), pages 101-113.
    19. Yingyi Qian, 1988. "Urban and Rural Household Saving in China," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 592-627, December.
    20. Christopher D. Carroll & Lawrence H. Summers, 1991. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Chapters, in: National Saving and Economic Performance, pages 305-348 National Bureau of Economic Research, Inc.
    21. 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.
    22. Jefferson, Gary H. & Su, Jian, 2006. "Privatization and restructuring in China: Evidence from shareholding ownership, 1995-2001," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 146-166, March.
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