China's High Saving Rate: Myth and Reality

31 Pages Posted: 28 Jun 2010

See all articles by Guonan Ma

Guonan Ma


Yi Wang

University of Pennsylvania - The Wharton School

Date Written: June 1, 2010


The saving rate of China is high from many perspectives - historical experience, international standards and the predictions of economic models. Furthermore, the average saving rate has been rising over time, with much of the increase taking place in the 2000s, so that the aggregate marginal propensity to save exceeds 50%. What really sets China apart from the rest of the world is that the rising aggregate saving has reflected high savings rates in all three sectors - corporate, household and government. Moreover, adjusting for inflation alters interpretations of the time path of the propensity to save in the three sectors. Our evidence casts doubt on the proposition that distortions and subsidies account for China's rising corporate profits and high saving rate. Instead, we argue that tough corporate restructuring (including pension and home ownership reforms), a marked Lewis-model transformation process (where the average wage exceeds the marginal product of labour in the subsistence sector) and rapid aging process have all played more important roles. While such structural factors suggest that the Chinese saving rate will peak in the medium term, policies for job creation and a stronger social safety net would assist the transition to more balanced domestic demand.

Keywords: Corporate, Household and Government Saving, Chinese Economy

JEL Classification: E20, E21, O11, O16, O53

Suggested Citation

Ma, Guonan and Wang, Yi, China's High Saving Rate: Myth and Reality (June 1, 2010). BIS Working Paper No. 312, Available at SSRN: or

Guonan Ma (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210

Yi Wang

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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