China: High Household Savings Thwarting Consumerism Efforts

 Econintersect:  One of the strategies that China could pursue to reduce global trade imbalances would be to increase domestic consumption.  The high household savings rate in China is a strong countering force to such efforts.A research paper by Marcos Chamon, Kai Liu and Eswar Prasaud analyzes the savings rates in China and find that, combining households, enterprises and government, the savings rate in China exceeds 50% of GDP.  This is up from about 36% ten years ago.

Household savings is not growing as rapidly since 2007, but is maintaining a level about 20% of GDP.  Since GDP has been rising rapidly the absolute amount of household savings in China is still increasing.

Source:  GEI Analysis.