Households' Savings in China

49 Pages Posted: 24 Feb 2012

Date Written: November 23, 2011


This paper studies the determinants of Chinese households’ saving. Domestic saving in China is the highest in the world in terms of GDP and it is mirrored in a large and persistent current account surplus. First, we show that notwithstanding the rising contribution of government and firms to national savings, they stand out because of households’ behaviour. Our econometric analysis proceeds from the work of Modigliani and Cao (2004) that explained rising personal saving in China within the life-cycle hypothesis. We prove that their explanation is insufficient. Then, using panel data and exploiting differences among provinces and between urban and rural households, we show that there is a significant dissimilarity in savings decisions in urban and rural areas and that motives other than those envisaged in the life-cycle model might play a major role, above all precautionary savings and liquidity constraints. Our results suggest that to reduce the propensity to save of Chinese households it is necessary to improve the provision of social services and to facilitate access to credit.

Keywords: China, saving rate, precautionary savings

JEL Classification: D12, E21, O18

Suggested Citation

Cristadoro, Riccardo and Marconi, Daniela, Households' Savings in China (November 23, 2011). Bank of Italy Temi di Discussione (Working Paper) No. 838, Available at SSRN: or

Riccardo Cristadoro

Bank of Italy ( email )

Via Nazionale 91
Servizio Studi
00184 Roma
+39 06 4792 3341 (Phone)
+39 06 4792 3720 (Fax)

Daniela Marconi (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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