{
  "title": "Chart of the Week: China’s Thrift, and What to Do About It",
  "publication": "IMF Blog, February 26, 2018",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2018/02/26/chart-of-the-week-chinas-thrift-and-what-to-do-about-it",
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  "summary": "China’s saving rate is 46 percent of GDP.",
  "sections": [
    {
      "heading": "Key facts and statistics",
      "content": "- China’s saving rate is 46 percent of GDP.\n- Households account for about half of savings; corporations and the government make up the rest.\n- Demographics explain about half the increase in saving.\n- China’s saving rate started to soar in the late 1970s.\n- Household debt, while still low, has risen rapidly in recent years (linked largely to asset price speculation).\n- Declines in government spending on social services occurred during the economic transition in the 1980s and 90s."
    },
    {
      "heading": "Drivers of high saving",
      "content": "- Demographic change\n  - The “one child” policy led to dramatically smaller average family size.\n  - Smaller families reduced spending on children and increased precautionary saving because children are a traditional source of support in old age.\n- Income inequality\n  - Greater income inequality from the transition to a more market-driven economy increased overall saving because wealthier households save a larger share of income.\n- Economic and policy shifts\n  - More Chinese now own homes (rather than receive housing from state-owned enterprises), prompting savings for down payments and mortgages.\n  - Reduced government provision of social services during the 1980s and 90s raised the need for household saving for retirement and health care."
    },
    {
      "heading": "Implications and risks",
      "content": "- Excessive household saving implies low consumption and lower household welfare.\n- High saving can fuel excessive investment and a buildup of debt in China.\n- High domestic saving and relatively low imports by Chinese consumers contribute to global imbalances."
    },
    {
      "heading": "Policy recommendations to encourage spending",
      "content": "- Make the income tax more progressive and family friendly.\n- Spend more on health care, pensions and education.\n- Spend more on assistance to the poor to reduce income inequality.\n- Raise revenue to finance these measures, for example by:\n  - Increasing dividends paid by state-owned enterprises.\n  - Transferring shares of state-owned firms to social security funds."
    },
    {
      "heading": "Closing observation",
      "content": "- With appropriate policies, China can encourage more domestic spending while avoiding the fate predicted by Confucius: “He who does not economize must agonize.”\n\nSource: Chart of the Week: China’s Thrift, and What to Do About It (The Editors, February 26, 2018).\n\n---\n\n\n References\n\n- https://www.imf.org/wp-content/uploads/2018/02/BLOG-1024x600-China-savings-bank-Imagine-china-Newscom-ichphotos233812.jpg\n- https://www.imf.org/wp-content/uploads/2018/02/engchina-feb-21.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2018/02/26/chart-of-the-week-chinas-thrift-and-what-to-do-about-it"
    }
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    "Authors: The Editors",
    "Published: February 26, 2018",
    "China’s saving rate is 46 percent of GDP.",
    "Households account for about half of savings; corporations and the government make up the rest.",
    "Demographics explain about half the increase in saving.",
    "China’s saving rate started to soar in the late 1970s.",
    "Household debt, while still low, has risen rapidly in recent years (linked largely to asset price speculation).",
    "Declines in government spending on social services occurred during the economic transition in the 1980s and 90s.",
    "Demographic change",
    "Income inequality",
    "Economic and policy shifts",
    "Excessive household saving implies low consumption and lower household welfare.",
    "High saving can fuel excessive investment and a buildup of debt in China.",
    "High domestic saving and relatively low imports by Chinese consumers contribute to global imbalances.",
    "Make the income tax more progressive and family friendly.",
    "Spend more on health care, pensions and education.",
    "Spend more on assistance to the poor to reduce income inequality.",
    "Raise revenue to finance these measures, for example by:",
    "With appropriate policies, China can encourage more domestic spending while avoiding the fate predicted by Confucius: “He who does not economize must agonize.”",
    "[https://www.imf.org/wp-content/uploads/2018/02/BLOG-1024x600-China-savings-bank-Imagine-china-Newscom-ichphotos233812.jpg](https://www.imf.org/wp-content/uploads/2018/02/BLOG-1024x600-China-savings-bank-Imagine-china-Newscom-ichphotos233812.jpg)",
    "[https://www.imf.org/wp-content/uploads/2018/02/eng_china-feb-21.jpg](https://www.imf.org/wp-content/uploads/2018/02/eng_china-feb-21.jpg)"
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