NBER: You'll Have To Wait Another Generation To See China Change Its Savings Rate

Ancient Ming Chinese Art

Photo: Wikimedia

The Cubs may win the World Series before China changes its domestic savings rate.That’s the takeaway from a National Bureau of Economics Research paper measuring savings rates in developing Asian countries.

The authors found that unlike most societies that are getting older, China’s domestic saving rate is projected to remain roughly constant for the next two decades.

As of 2008, savings as a per cent of GDP were over 50%; and about 40% of disposable income in 2009, according to Brookings.

This is due the downward pressure of a rapidly ageing population colliding head-on with upward pressure caused by higher income levels, the authors say.

In general, the authors found, rapidly ageing populations will overwhelm any increase in savings caused by higher incomes. Where citizens were younger, savings rates were higher.

The other major finding was a bifurcating effect of development. At an initial stage, savings rates increased; while at a later stage, the rise of credit mechanisms caused the rate to decline.

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