Determinants of Household Saving in China

Thi recent NBER research paper examines the determinants of China's high household saving rates. One of the problems China will face in the next few years as it shifts from an export driven economy is how to boost domestic consumption.

We have touched on this is previous posts but as long as government services such as health and education remain underfunded then saving rates will continue to remain high.

This will mean there will be no end to China vast foreign exchange surpluses and hence pressure for the currency to appreciate will continue.

----------------

"The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data"
NBER Working Paper No. W12723


Contact: CHARLES YUJI HORIOKA
Osaka University - Institute of Social and Economic
Research (ISER), National Bureau of Economic
Research (NBER)
Email: horioka@iser.osaka-u.ac.jp
Auth-Page: http://ssrn.com/author=77912

Co-Author: JUNMIN WAN
Osaka University - Osaka School of International
Public Policy (OSIPP)
Email: wan@iser.osaka-u.ac.jp
Auth-Page: http://ssrn.com/author=509706

Full Text: http://ssrn.com/abstract=948185

ABSTRACT: In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the
1995-2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, and (in some cases) the real interest rate and the inflation rate.
However, we find that the variables relating to the age structure of the population usually do not have a significant impact on the household saving rate. These results provide mixed support for the life cycle hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.

----------------

NBER papers require an academic subscription or can be purchased. Academics are generally a friendly bunch and may not be adverse to emailing copies to those interested.