Social Insurance and Household Consumption in China

Chong-En Bai and Binzhen Wu
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Binzhen Wu: Tsinghua University

Chapter 8 in The Chinese Economy, 2012, pp 166-195 from Palgrave Macmillan

Abstract: Abstract The Chinese household saving rate has been high and continually rising in recent years. The household saving rate rose by about ten percentage points from 1995 to 2008 and reached 28 per cent in 2008. This increase is higher than that observed in most other countries, including East Asian nations (Prasad 2009). This phenomenon, referred to as the Chinese saving puzzle, has been the subject of considerable international attention. Literature has provided many different explanations for the high saving rate in China. One of the most popular is related to the lack of a generous safety net in the country (Chamon and Prasad 2010; Meng 2003). In particular, people reduce consumption due to the income or expenditure risks associated with retirement, medical expenses and/or children’s education. The uncertainty about future status elicits more savings than the level that can smooth consumption in the case of no uncertainty. This is defined as the precautionary saving motive.

Keywords: Household Consumption; Wage Income; Precautionary Saving; Individual Account; Taxable Wage (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1057/9781137034298_9

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