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Understanding China’s High Savings Rate

문서에서 Credit and Credibility (페이지 55-58)

To accurately address the implications of China’s domestic savings for financial risk management, it is essential to know which actors are saving and how much they are saving, as well as exploring some of the reasons why, although a full examination of the latter question is beyond the scope of this study. This section reviews a selection of the literature explaining high savings rates among both Chinese households and corporates. Prior to the reform and opening period began in 1978, China’s high savings rate was engineered by distorted relative prices that favored industry, which concentrated profits in the form of operating surpluses at state-owned enterprises.62 Price reform and competition after reform eroded public saving, while rising household incomes contributed to higher household savings.63 Chinese savings trends have seen three broad phases since 1978: an increase from around 35 percent of GDP to 45 percent between 1982 and 1994, followed by a decline to around 37 percent in 2000, and then a remarkable climb afterwards, surpassing 50 percent of GDP earlier this decade. The contributions to national savings can be

62 Aart Kraay, “Household Saving in China,” World Bank Economic Review, vol. 14, no. 3 (September 2000): 545-569.

63 Ibid.

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Fixed Asset Investment: Non-Real Estate Fixed Asset Investment: Real Estate Total Fixed Asset Investment Gross Fixed Capital Formation

subdivided between household, corporate, and government sectors—China ranks near the top globally in all three.64

China today has a national savings rate that is incredibly high compared to most other countries. In 2016, the national savings rate was about 46 percent of GDP, compared to a world average of 26 percent.65 Over the past 15 years, there have been many studies investigating the causes of the high savings rate in China.

Kraay (2000) found that high economic growth and favorable demographics partially explain China’s savings, but even given those characteristics, China’s rate was 10 percentage points higher than expected.66 Maintaining a high rate of investment in tandem with a high savings rate has required rapid growth of the financial system, and temporary controls on credit growth (to limit inflation) have correspondingly forced China’s trade surplus to rise at many times.

There are several examples of economies with high national savings rates that still experienced crises or a sharp slowdown in growth; a high savings rate is no panacea for avoiding financial distress. In the 1990s prior to the Asian financial crisis, Singapore’s economy had several characteristics in common with China’s: a growing current account surplus, a high savings rate, and high levels of foreign exchange reserves. It was hit particularly hard during the Asian crisis and during the global financial crisis due to its openness to trade and the large role of manufacturing in its economy. The measures it deployed to cope with the 2008 crisis resulted in a stimulus package equivalent to 8 percent of its GDP and government guarantee of all bank deposits until the end of 2010.67 These measures were mainly financed by Singapore’s reserves, the first time the government had to draw on reserves to mitigate an economic recession.68 South Korea and Thailand both experienced sustained economic growth in the decades prior to the Asian financial crisis due to export-oriented policies, productivity gains, and investment growth financed by high levels of private savings and external borrowing.69 As a result of the Asian financial crisis, both endured significant declines in output, consumption, and investment. After currency depreciation was insufficient to boost output, and after limiting exposure to external financing due to capital outflow risks, policymakers sought to stimulate domestic demand by increasing public credit and by encouraging commercial banks to increase lending to private firms and consumers.70 This decision caused a sharp increase in household debt, particularly via credit cards in Korea. Banks had limited ability to extend credit due to the high levels of non-performing loans on their balance sheets after the crisis. The Thai

government effectively bailed out a state-owned commercial bank, allowing the transfer of bad assets to a government asset management company and increasing the bank’s ability to lend. Domestic credit expansion did boost economic growth in both countries by the early 2000s, led by private consumption, but at the cost of higher household debt levels.

64 Guonan Ma and Wang Yi, “China’s High Saving Rate: Myth and Reality,” Bank for International Settlements, June 2010, p. 6, https://www.bis.org/publ/work312.pdf.

65 “China’s High Saving Rate: Analytics and Prospects,” Federal Reserve Bank of Atlanta, May 18, 2017, https://www.frbatlanta.org/-/media/documents/news/conferences/2017/0518-second-research-workshop-chinas-economy/presentations/zhang.pdf; “People’s Republic of China: Selected Issues,” International Monetary Fund, IMF Country Report, no. 17/248, August 2017, p. 4.

66 Aart Kraay, “Household Saving in China,” World Bank Economic Review, vol. 14, no. 3 (September 2000): 545-569.

67 Jordan, Rolf, “Singapore in Its Worst Recession for Years. The Effects of the Current Economic Crisis on the City-State’s Economy,”

Journal of Current Southeast Asian Affairs, vol. 28, no. 4, (2009): 104-106.

68 Ibid.

69 Diego Valderrama, “After the Asian Financial Crisis: Can Rapid Credit Expansion Sustain Growth?” Federal Reserve Bank of San Francisco Economic Letter 38, (2004), https://www.frbsf.org/economic-research/publications/economic-letter/2004/december/after-the-asian-financial-crisis-can-rapid-credit-expansion-sustain-nbsp-growth/.

70 Ibid.

Figure 3-5: Domestic Savings versus GDP in Countries with 50 Highest National Saving Rates, 2016 Billion USD

Source: World Bank. Gross savings are calculated as gross national income less total consumption, plus net transfers.

The sectoral composition of China’s savings has also diverged from worldwide trends. In the 1980s, global household savings financed most investment, but as of 2016, corporate savings supplied about two-thirds of investment.71 Chinese corporates saved even more than global corporates during this period. During the 2000s corporate savings in China ranged from 6 to 12 percentage points higher than the rest of the world (ROW) average.72 In other countries, increased corporate savings were partially offset by increased

household consumption, but in China, households also began to save significantly more following the turn of the century. The result was a large savings gap between households in China and those in the rest of the world. Chinese households saved 23 percent of GDP in 2017, about 15 percentage points more than the global average, according to the IMF.73 The government savings gap is also large, ranging from 6 to 8 percentage points higher in China than global averages from 2009 through 2013.74

Throughout the 2000s, China’s enormous and sustained current account surplus was a key source of international imbalances75 and has even been cited as a contributor to the 2008 global financial crisis.

These trends naturally drove research on the causes of China’s propensity to save more than any similarly sized economy, with China’s current account surplus reaching a high of 10 percent of GDP in 2007. China’s rising current account surplus starting in 2003 was self-perpetuating and self-reinforcing. Rising external surpluses resulted in additional investment by profitable export enterprises into new capacity,

contributing to additional export volumes. Intervention by the People’s Bank of China to limit the

corresponding appreciation of the currency similarly facilitated not only cheaper exports for Chinese firms,

71 Peter Chen et al., “The Global Rise of Corporate Saving,” Federal Reserve Bank of Minneapolis, Working Paper 736, March 2017, https://www.minneapolisfed.org/research/wp/wp736.pdf.

72 Ibid.

73 “People’s Republic of China: Selected Issues,” International Monetary Fund, IMF Country Report No. 17/248, August 2017, 5.

74 Ibid, 6.

75 Ben Bernanke, “The Global Savings Glut and the US Current Account Deficit” (speech, Richmond, VA, March 10, 2005), Federal Reserve Board, https://www.federalreserve.gov/boarddocs/speeches/2005/200503102/; Rajan, Raghuram, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton University Press, 2011).

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making them more attractive for foreign customers, but lower long-term interest rates in developed economies that facilitated additional borrowing by overseas consumers. The result was a savings rate far in excess of China’s investment growth rate throughout most of the early 2000s. The emergence of

inflationary pressure in China also drove controls on credit, which probably curtailed new investment and expanded the external surplus further.

Since the 2000s, China’s savings rate has stabilized and even started to slightly decline. This has primarily been the byproduct of falling household savings, which has coincided with an increase in household debt.

In this case, a rise in household borrowing appears to have allowed an expansion of household consumption and a reduction in the savings rate, consistent with trends in household credit in more developed financial markets.76 A recent nationwide China Family Panel Studies survey of household wealth dynamics from 2010 to 2012 found rural households are more indebted than urban households.77 China’s current account surplus has similarly declined as a proportion of the economy, primarily because credit growth has been rapid and investment has accelerated since 2009. The growth of credit in this fashion, as discussed in Chapter 2, is an unsustainable phenomenon, and China has already taken measures to correct it, primarily by controlling borrowing within informal and less regulated financial sectors.

문서에서 Credit and Credibility (페이지 55-58)