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]

TAGS: ,

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 31

View All Comments »
  1. Raquel says:

    Make me start to think that an inverse dowry (the money a husband pays the family of the wife) might solve the missing girls problem.

    Thumb up 0 Thumb down 0
  2. Abby says:

    It is a pretty well known tradition among Chinese people….it is not uncommon for middle class parents to save 150,000-300,000 yuan for their son’s wedding as they are also supposed to buy the first home for him and his new wife. People in China (like my own relatives) have an easier time paying b/c my parent’s generation had steady government jobs and incomes and government assigned housing. There is no need to pay for mortgages or car loans since most people didn’t have cars….food is relatively cheap and so it is a lot easier to save than it is here.

    Thumb up 0 Thumb down 0
  3. Tracy says:

    I think the real issue here is: Why Don’t Americans Save?

    Saving is the smart, prudent thing to do. Spending every last penny and accuring debt is probably not what we should consider “default” behavior.

    Tracy W.

    Thumb up 0 Thumb down 0
  4. Fuji says:

    Delayed gratification – the marshmallow test.

    Thumb up 0 Thumb down 0
  5. Hu An says:

    Westerners seem to think that if the Chinese government were to use its hard-earned savings to create a welfare state, Chinese will start spending.

    That’s unlikely, nor is the Western welfare state desirable for China. From what I’ve seen and experienced within my own family, Chinese to start their own business. Everyone in the family saves as much as they can and then they pool their money together to buy a stall. They repeat the process in hopes of buying a storefront. And so forth. Chinese save because they’re entrepreneurial and seek to improve their lives.

    Another reason Chinese save is because they don’t have and many businesses don’t accept credit cards.

    And finally, Chinese will spend a lot when they have a lot money. The wealthiest Chinese are far more likely to buy designer clothes and handbags than their Western counterparts. And I’m willing to bet that middle-class Americans are far more willing to spend on designer fashions than their Chinese counterparts. In China, the wealthy are conspicuous consumers. In the US, it’s the middle class who are conspicuous consumers.

    China doesn’t need a welfare state. Using welfare to spur spending will at best, result in little or no increase in spending and at worst, weaken Chinese entrepreneurial spirit and self-reliance. Spending money on welfare is a waste of money. Better to spend on infrastructure.

    Thumb up 0 Thumb down 0
  6. Matthew says:

    Excess males in China – recipe for WW3 (Armageddon). Revelations tells us that a great power in the east will rise in the end times and fight a war in the middle east (Israel).

    Thumb up 0 Thumb down 0
  7. player hater says:

    Chinese, Koreans, and Japanese save more than expected for several reasons.

    1. East Asian countries have only recently emerged from extreme poverty. Even for Japan – a highly developed country today – it was nothing more than poor feudal state just 100 years ago. Having recent memories of poverty is a great motivation to save.

    2. East Asian cultures are less individual-oriented and more family-oriented. There is less of the “spend all your wealth by the time of the death” mentality that is so prevalent among Westerners because the parents are expected pass their wealth to their children. Ironically, I also believe that this behavior will limit Asia’s long-term economic growth because historically, large inheritance results in less incentive to strive for economic success.

    3. The gender imbalance as described in this article is probably the third factor.

    Thumb up 0 Thumb down 0