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ID:
113689
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| Publication |
2012.
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| Summary/Abstract |
The domestic saving rate in China is the highest in the world and it surpasses the investment share in GDP, which is also very high by international standards. This excessive saving results in a large current account surplus. Understanding why the Chinese save so much is a central issue in the debate on global imbalances. The goal of our paper is to analyse empirically Chinese household saving behaviour taking into account the disparities within the country, at the provincial level and between rural and urban households. We first show that, notwithstanding the rising contribution of government and firms to national savings the real peculiarity lies with Chinese families. We move from Modigliani and Cao's (2004) attempt to explain rising personal saving in China within the life cycle hypothesis and show how a more careful analysis indicates that life-cycle determinants do not suffice, especially in the most recent period. Once we consider regional differences and distinguish urban and rural households using provincial-level data, it becomes clear that additional explanations are needed and that precautionary motives and liquidity constraints are playing an important role. Our results suggest that in order to reduce the propensity to save of Chinese households it is necessary to improve social services provision and to facilitate the access to credit.
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| 2 |
ID:
112719
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| Publication |
2012.
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| Summary/Abstract |
China's over 25% aggregate household saving rate is one of the highest in the world. One popular view attributes the high saving rate to fast-rising housing prices in China. However, cross-sectional data do not show a significant relationship between housing prices and household saving rates. This article uses a simple consumption-saving model to explain why rising housing prices per se cannot explain China's high household saving rate. Although borrowing constraints and demographic changes can translate housing prices to the aggregate saving rate, quantitative simulations of our model using Chinese time-series data on household income, housing prices, and demographics indicate that rising mortgage costs can increase the aggregate saving rate by at most 2 to 4 percentage points in the best down-payment structure.
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| 3 |
ID:
076890
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| Publication |
2007.
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| Summary/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
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