How Will China's Saving-Investment Balance Evolve?

32 Pages Posted: 20 Apr 2016

See all articles by Louis Kuijs

Louis Kuijs

World Bank; International Monetary Fund (IMF)

Date Written: July 1, 2006

Abstract

This paper investigates how China's saving, investment, and saving-investment balance will evolve in the decades ahead. Household saving in China is relatively high compared with OECD countries. However, much of China's high economywide saving, and the difference between China and other countries, are due to unusually high enterprise and government saving. Moreover, cross-country empirical analysis shows that economywide saving and investment in China are higher than what would be expected, even adjusting for differences in economic structure. Combined, these findings suggest that much of China's high saving is the result of policies particular to China. Looking ahead, the econometric results suggest that purely on the basis of projected structural developments - including development, changes in economic structure, urbanization, and demographics - saving and investment would both decline only mildly in the coming two decades, with ambiguous impact on the current account surplus. However, the potential effect on saving, investment, and the saving-investment balance of several policy adjustments could be large. Several of these policies are identified and their likely impact assessed and quantified. This exercise suggests that rebalancing along these lines should reduce both saving and the current account surplus over time, although the surplus is unlikely to turn into a deficit soon.

Keywords: Economic Theory & Research, Investment and Investment Climate, Economic Investment & Savings, Non Bank Financial Institutions, Contractual Savings

Suggested Citation

Kuijs, Louis, How Will China's Saving-Investment Balance Evolve? (July 1, 2006). World Bank Policy Research Working Paper No. 3958. Available at SSRN: https://ssrn.com/abstract=923265

Louis Kuijs (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,299
Abstract Views
6,811
rank
15,560
PlumX Metrics