Shoppers flock to Shanghai streetsEugene Hoshiko
The Chinese have long been notorious savers. And new evidence suggests that despite growing economic might, this behaviour isn't changing. But the reasons behind it might be.
The country's gross domestic savings has surged since 2000, climbing to more than 50 per cent of GDP starting in 2007, according to a recent study. High savings applies to government, enterprise and households, whose average savings rate has climbed steadily over the last 15 years.
Urban households, which account for about two-thirds of national income, have been saving as well. Their average saving rate relative to disposable income climbed from 18 per cent in 1995 to 29 per cent in 2009 (comparatively, the U.S. savings rate before the economic crisis was 3 per cent, and 6 per cent in recent months), against a backdrop of rapid economic growth and low interest rates on bank deposits.
The Chinese government has made it a priority to "rebalance" growth by stoking private consumption but, despite these efforts, the household savings rate remains high across the board, including households with younger and older heads. This runs against conventional wisdom: Savings rates generally increase with the household head's age, peaking near retirement before declining.
Some have pointed to habit and a lack of good investment options as explanations. Others say it has to do with a decline of public provisions, including health care. Market reforms in the 1980s meant the end of the "iron rice bowl" of permanent state employment, and today more than 600 million Chinese are uninsured, according to a recent story in National Journal. This makes getting sick - and old - an expensive proposition.
Another theory has to do with the increasingly competitive marriage market.
In China, thanks to the traditional preference for boys, and exacerbated by the one-child policy, there are approximately 122 boys born for every 100 girls, which means about one in five Chinese men will be unable to find a wife when they grow up.
A recent paper by Shang-Jin Wei and Xiaobo Zhang for the National Bureau of Economic Research found that this situation might cause men and parents with sons to cut down on family spending in order to make themselves or their boys more competitive.
Evidence suggests the trend exists: The study found households with sons saved more than those with daughters, and that they tended to increase their savings rate if they lived in a region with a greater gender imbalance.