China’s High Savings: Drivers, Prospects, and Policies

By Longmei Zhang, R. Brooks, Ding Ding, Haiyan Ding, Hui He, Jing Lu, Rui Mano

December 11, 2018

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Longmei Zhang, R. Brooks, Ding Ding, Haiyan Ding, Hui He, Jing Lu, and Rui Mano. China’s High Savings: Drivers, Prospects, and Policies, (USA: International Monetary Fund, 2018) accessed December 3, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

China’s high national savings rate—one of the highest in the world—is at the heart of its external/internal imbalances. High savings finance elevated investment when held domestically, or lead to large external imbalances when they flow abroad. Today, high savings mostly emanate 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 occured during the transition from planned to market economy. Housing reform and rising income inequality also contribute 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.

Subject: Consumption, Disposable income, Expenditure, Income, Income inequality, National accounts, Social assistance spending

Keywords: China, Consumption, Demographic Changes, Disposable income, GDP, Global, Government saving, Household saving, Housing, Income, Income inequality, Inequality, Projections, Saving, Saving inequality curve, Savings, Savings rate, Social assistance spending, Social Safety Net, SOE savings, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/277
Stock No:

WPIEA2018277
ISBN:

9781484388778
ISSN:

1018-5941

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