An alternative explanation for high saving in China: Rising inequality

Xinhua Gu, Pui Sun Tam, Guoqiang Li and Qingbin Zhao

International Review of Economics & Finance, 2020, vol. 69, issue C, 1082-1094

Abstract: This paper examines potential factors contributing to China's originally high and subsequently rising rate of aggregate saving prior to the global financial crisis. We find strong evidence that the high and rising level of income inequality in China is a significant mover of its savings glut. Behavioral inertia, income growth, industrial structure, and policy orientation (fiscal receipts and real interest rates) are also found to be responsible for high saving that, however, is somewhat alleviated by rising old dependency under population ageing. The policy implication of our findings is that a corrective redistribution of income in favor of the working class is urgently needed for China to boost consumption spending, make economic growth rely less on investment or trade, and help mitigate worsening global imbalances.

Keywords: China; Saving; Debt; Inequality; Growth; Policy; Demographics (search for similar items in EconPapers)
JEL-codes: D12 D31 D91 E21 J10 O16 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056018310542
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:69:y:2020:i:c:p:1082-1094

DOI: 10.1016/j.iref.2018.12.004

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().