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]


Wow, that is a crazy connection. I'm waiting for when the one-child policy creates the need for a war to kill off all those extra men. However, the war might be in Vietnam, after the Chinese buy all their women.


Recently the Indian Savings Rate plunged.

It is now at 34%. eh!

Can't test it, so it's just speculation

How can they test this theory?

Abhimanyu Agrawal

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).

Garrett Pendergast

File this under "Unintended Consequences".


I'm not sure this scenario applies to people of Chinese descent living in Vancouver, Paris, or wherever.

And this demographic imbalance doesn't apply to Korea or Japan.

But both categories above save a lot too.

Isn't it just a cultural thing ?

Mike B

China also doesn't have any social safety net and traditional forms of protection for people in their old age are breaking down as children move away to the cities leaving their parent's behind. As having lots of children was the old form of social safety net the one child policy is having an effect there.


A rather spurious conclusion, but entertainment value trumps logical consistency in my book anyways.

Even better, maybe things are reversed? Rather than families with boys actively saving more, perhaps families with girls actively spend more?


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.


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


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?

Angela Yun

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)).

Yik keng yeong

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.


"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 :)


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.


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

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


So does this mean that average marrying age of men is going up too, as they need time to save up that money?


For the people living in countryside, most parents do save a large fraction of their earnings for their sons' marriage. It is very common borrowing from relatives for a wedding and return later. The same applies to the low and middle income working class living in cities. As these groups of people accounts for about 90% of the China population, their savings account for a large percentage of the whole country's saving. It is true there is a tradition in China that people keep trying to save for the uncertain future no matter how much they earn.


Why the Chinese Save?

Because most Asian cultures are long-term oriented. They save for cultural, not for economic reasons.


I wonder if the authors are native Chinese who can understand the social nuances of each region, bride price, class and status. To American economists all these may be hard to capture and transfer into a sensible economic theory.
I can't say for China but Indians have always been frugal and this was not linked to their kids' marriage prospects. Parents of daughters saved for wedding expenses but parents of sons also had to save for college costs etc.

In most urban areas these days sons and daughters are treated equally and dowries are not as huge -- love marriages are cheaper for the bride's family than arranged marriages where the groom's family can bargain and demand.
Indians saved because that was their primary safety net ...social services when available are of such poor quality . The Gov provides subsidized food, health care, schooling but no one expects to use them unless desperate.