Why the Chinese Save

Some say that a major cause of the U.S. housing bubble was a surge in savings overseas, particularly in China, where the personal savings rate soared to 30 percent of disposable income. (In the U.S., meanwhile, we were saving next to nothing). Just why the Chinese were saving so much has been a puzzle to many economists. Now Shang-Jin Wei and Xiaobo Zhang think they’ve come up with an explanation. It turns out that China’s “one child” policy, which created a huge surplus of men in the country, has driven up the cost of getting married, as more and more men compete for fewer and fewer women. To keep up, families with sons have been holding off on spending to save up wealth that boosts their children’s marriage prospects. In their paper, Wei and Zhang argue that Chinese marriage-price inflation could account for as much as half of the increase in the country’s household savings since 1990. [%comments]


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  1. Kat says:

    It is a cultural thing. Chinese people don’t like spending money they don’t have. Credit Cards and loans are still very new to their lifestyles because they do enjoy having a safe financial cushion in savings for comfort and peace of mind.

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  2. ponbop says:

    Or maybe they have less kids to pay for, so more money to save?

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  3. Mike says:

    I thought this was a settled issue. China has no social safety net, therefore individuals have to provide their own fallback. In addition there are clear cultural / political differences. The Chinese can’t trust their government so they save for contingencies. Americans are (were) of the opinion that tomorrow would be better than today so why hold back?

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  4. Angela Yun says:

    This increase in personal savings might also have to do with the simple fact that the a larger portion of the Chinese population is actually ABLE to save due to the recent economic expansion. Before the economic expansion a greater portion of the population may have had a marginal propensity to save close to zero, spending everything they earned to…well, basically survive. But today people are probably finding themselves more educated, better paid, and ultimately able to save/save more for future incentives (and those incentives probably do include the expensive wedding(s)).

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  5. Yik keng yeong says:

    The Chinese, as indeed the ethnically and socially related Japanese, Koreans and IndoChinese communities save for a few cogent reasons, first and foremost of which being that THRIFT is considered a virtue. It is a virtue of eroding value and viewd with a jaundiced eye by many young of today but nevertheless still cherished and inculcated from childhood in traditional Chinese homes. These communities abhor the concept of spending potential income and will mortgage their future incomes for only purchase of property or the pursuit of an education, both ventures being historically proven since their feudal homeland times to pay dividends over and above the burden and cost of obtaining credit. Yes, it is also true that the Chinese believe in choosing spouses of equivalent wealth, position, status and education. A display of home assets or a doctorate is as potent as a display of vulgar cash.

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  6. hmmm... says:

    “In India, where savings rates are also very high, it’s exactly the opposite. Families save for spending lavishly on their daughter’s marriage (and dowry too, sometimes).”

    Sounds like a solution in the making. All the excess Chinese boys can marry all the excess Indian girls and we’ll get peace in the region too :)

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  7. Kent says:

    Your one-child policy-based theory makes some sense, but it probably has as much to do with people living in a country who until recently, were so poor that their instinct in times of plenty is still to save and to live frugally.

    Witness Americans who grew up during the Great Depression who also had relatively high savings rates.

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  8. Tzipporah says:

    Has anybody considered actually asking Chinese people what they are saving for?

    I know, radical suggestion in economics, but come on, people… !

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