China’s High Savings: Drivers, Prospects, and Policies
IMF Working Papers, December 11, 2018
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- China’s High Savings: Drivers, Prospects, and Policies
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Bibliographic details
- Authors: Longmei Zhang, R. Brooks, Ding Ding, Haiyan Ding, Hui He, Jing Lu, Rui Mano
- Published: December 11, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484388778.001
Summary and Key Findings
- 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.
- Moving forward, demographic changes will put downward pressure on savings.
Drivers of High Savings
- Household-sector origins: high savings mostly emanate from the household sector.
- Demographic changes: induced by the one-child policy.
- Transformation of social protections: changes in the social safety net and job security that occurred during the transition from planned to market economy.
- Housing reform and rising income inequality also contribute to higher savings.
Prospects and Projections
- Demographic changes are expected to exert downward pressure on savings going forward.
- The paper links savings behavior to internal/external balance outcomes: domestically held savings finance elevated investment; externally flowing savings produce large external imbalances.
Policy Recommendations
- Strengthen the social safety net to reduce precautionary household saving.
- Reduce income inequality to lower saving incentives and boost consumption.
- Policies aimed at social protection and redistribution are presented as necessary to reduce savings further and boost consumption.
Subject Tags and Keywords (as provided)
- 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
Content in this bundle
- China’s High Savings: Drivers, Prospects, and Policies, WP/18/277, December 2018