Why Do the Chinese Save So Much?

<p>Given its far-reaching effects, both private sector analysts and policymakers have attempted to trace the causes of China's high savings rate and to predict how long it will last. Some have attributed the savings primarily to Chinese corporations rather than households. Others point to a precautionary savings motive: Because Chinese people are worried about costs of health care, education and old-age pensions and are unsure about how much these costs might change over time, they respond by saving more. Other explanations point to habit formation or financial development.</p><p>But these explanations do not tell the whole story and possibly are not the most important part of the story. In my recent research with Xiaobo Zhang, we hypothesized that one important social phenomenon is the primary driver of the high savings rate. For the last few decades China has experienced a significant imbalance between the number of male and female children born to its citizens.</P>