THE ROLE OF SAVINGS RATE IN DEEPENING MACROECONOMIC IMBALANCES IN CHINA

Sarlea Mihaela (), Manta Stefan George () and Vaidean Viorela Ligia ()
Additional contact information
Sarlea Mihaela: Faculty of Economics and Business Administration,,
Manta Stefan George: Faculty of Economics and Business Administration,,
Vaidean Viorela Ligia: Faculty of Economics and Business Administration,,

Annals of Faculty of Economics, 2013, vol. 1, issue 1, 1018-1027

Abstract: It is well known that China is a growing power and its impressive economic indicators have been the subject of numerous studies along the years. China's impressive economics growth in the years 2000 based on one hand by an expansionary monetary policy, on other hand by promoting export growth had also brought into discussion another factor: that of the high savings rate. This article brings into light China's high savings rate -household, corporate and governmental- each with its role played in the entire equation of China's growth. There have been a lot of studies concentrating on this relationship between savings rate and economic growth. It appears that, in the case of China there is a positive relationship between high savings and high economic growth at least on the short run. This is due to the national savings rate which contributed to current account surplus that facilitated outflow and inflow of capital. Domestic investments and foreign growth had contributed to rapid economic growth despite the low level of consumption. If we add here the low demand for imported goods and the growth of households saving rate in the last year we have an image of deep macroeconomic imbalances. Furthermore, if we add to this analysis the idea of an external saving rate that proved to grow quicker than the world capacity to absorb this flows we have a vivid image of an empire as "rich country, poor population". This high savings rate in the long run will deepen macroeconomic imbalances. As a spiral this would have to accelerate reforms in the field of pensions, healthcare, social security. On top they would have to encourage the development of the banking system in order to create an image of a powerful country also in the long run. With these internal reforms the savings rate for households will encourage consumption and a normal level of savings, for corporations it will boost investments and for government it will lead to a balance account closer to reality and better use of the incomes.

Keywords: savings rate; current account; monetary policy; macroeconomic imbalances (search for similar items in EconPapers)
JEL-codes: E21 F32 H62 J11 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://anale.steconomiceuoradea.ro/volume/2013/n1/107.pdf (application/pdf)

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:ora:journl:v:1:y:2013:i:1:p:1018-1027

Access Statistics for this article

More articles in Annals of Faculty of Economics from University of Oradea, Faculty of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Catalin ZMOLE ( this e-mail address is bad, please contact ).