How Much Will China Save? Projecting China’s National Savings Through 2030

38 Pages Posted: 11 May 2010

See all articles by Laurence J. Kotlikoff

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Shuanglin Lin

University of Nebraska at Omaha - Department of Economics

Yun Yun Jiang

Peking University

Shi Yu Li

Peking University - School of Economics

Wing Thye Woo

University of California, Davis - Department of Economics

Date Written: May 10, 2010

Abstract

China’s high savings rate and low consumption rate have become a major concern of policy-makers in China, as well as in the rest of the world. This paper integrates China’s demographic and national account data with age and sex profiles of household consumption- and labor earnings to project China’s national savings through 2030. Our baseline projections show that China’s wealth in 2030 would be 28-fold of its wealth in 2008. A lower rate of wealth accumulation (say 12% instead of the projected average of 16%) would increase consumption by 46%. While this lowering of the savings rate could reduce China’s high trade surpluses, it comes at the expense of lower consumption for future generations - a justifiable action only if the revealed rate of time preference is actually lower than the true time preference rate of Chinese society. Perhaps, a better solution for China’s trade surpluses is to greatly increase the amount of imported physical and human capital goods, i.e. to hold more of its wealth inside China. The spillover of China’s savings to abroad could reflect more the failure of China’s dysfunctional financial markets to intermediate the savings into investments and less the irrationality of Chinese savings behavior.

Keywords: Age- and Sex-relative Consumption and Labor-earnings Profiles, National Saving, Wealth Accumulation, China, Trade Imbalance

JEL Classification: 82, E21, E27, F13, J11, O53

Suggested Citation

Kotlikoff, Laurence J. and Lin, Shuanglin and Jiang, Yun Yun and Li, Shi Yu and Woo, Wing Thye, How Much Will China Save? Projecting China’s National Savings Through 2030 (May 10, 2010). Available at SSRN: https://ssrn.com/abstract=1604149 or http://dx.doi.org/10.2139/ssrn.1604149

Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4002 (Phone)
617-353-4449 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gaidar Institute for Economic Policy

Gazetny per. 5-3
Moscow, 125993
Russia

Shuanglin Lin

University of Nebraska at Omaha - Department of Economics ( email )

Omaha, NE 68182-0048
United States
402-554-2815 (Phone)
402-554-2853 (Fax)

Yun Yun Jiang

Peking University ( email )

Beijing
China

Shi Yu Li

Peking University - School of Economics ( email )

Beijing
China

Wing Thye Woo (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3035 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/woo/woo.html