The country with the highest household savings is China. So one of the indicators you should look at regarding investment is China
Reason of High Household Saving Rates
There are many possible reasons for the high household savings rate in China, such as demographic changes, income growth, income uncertainty, social security, housing reform, and credit constraints. Different studies have different explanations and estimates of the relative importance of these factors. Here are some of the main findings
The one-child policy, which was implemented in the 1980s, reduced the number of children and increased the dependency ratio, leading to higher savings for old-age support and precautionary motives.
The transition from a planned to a market economy, which started in the late 1970s, transformed the social safety net and job security, making households more vulnerable to income shocks and health risks, and thus more inclined to save for precautionary reasons.
The housing reform, which began in the 1990s, privatized the public housing stock and created a booming housing market, stimulating households to save more for down payments and housing investments.
The income inequality, which increased significantly since the 1980s, induced households to save more for status competition and social mobility, especially in urban areas.
The credit constraints, which limited households’ access to borrowing and insurance, forced households to rely on their own savings to finance consumption, education, health care, and other expenditures.
Forecast of Savings in The Future
The forecast of the household savings rate in China depends on various factors, such as the economic growth, the demographic trends, the policy reforms, and the consumer preferences. Results provide different scenarios and projections based on different assumptions and models. Here are some of the main findings from the web search results:
The demographic changes, such as the aging population, the declining labor force, and the relaxation of the one-child policy, will put downward pressure on the household savings rate in the future.
The policy efforts, such as strengthening the social safety net, improving the health care system, expanding the pension coverage, and reducing the income inequality, will also help to lower the household savings rate and boost the consumption.
The consumer preferences, such as the desire for lifestyle upgrades, the enthusiasm for travel and entertainment, and the shift from product to service consumption, will also contribute to the decline of the household savings rate and the increase of the consumption.
Effect of High Saving in China
The effect of the household savings rate in China on the domestic and global economy is complex and multifaceted. High household savings can finance high investment and support economic growth, but they can also create imbalances and distortions in the allocation of resources and the distribution of income. High household savings can also affect the global savings glut, the global interest rates, and the global asset prices, depending on the exchange rate regime and the capital account openness. Here are some of the main findings:
High household savings can crowd out consumption and reduce the domestic demand, leading to overcapacity and deflationary pressures in some sectors.
High household savings can also increase the dependence on external demand and exacerbate the trade surplus, leading to trade tensions and currency appreciation pressures.
High household savings can also generate excess liquidity and fuel asset bubbles, leading to financial instability and wealth inequality.
High household savings can also contribute to the global savings glut, which can lower the global interest rates and stimulate the global investment and growth, but also create global imbalances and financial fragility.
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