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Structure of saving and investment unbalanced in China: CSRC Chair

By Li Zhenyu (People's Daily Online)

17:03, July 05, 2012

BEIJING, July 5 (People's Daily Online) -- The structure of saving and investment in China's economy is severely unbalanced, the top Chinese regulator said recently.

Guo Shuqing, Chairman of the China Securities Regulatory Commission (CSRC), wrote an article, titled "Adjusting financial structure to pave way for economy" on People's Daily, China's flagship newspaper on July 2.

Mr. Guo wrote that China does not lack capital, the problem, however, is the structure of saving and investment is heavily unbalanced.

In the article, the top Chinese securities regulator broke down the structure of saving and investment in China's economy, presenting an overall picture as to how the national savings are used in the investment of industry, infrastructure construction, urban construction, rural areas and service industry.

According to Mr. Guo:

The national savings used in industry investment account for 40 percent of total fixed investments. As early as 2009, 21 out of 24 industrial sectors had had excess production capacity. None of the manufacturing businesses with a mature technology has a shortage of production capacity.

The national savings used in infrastructure construction, with construction of energy, transportation and communication, accounts for about 12 percent. It originally was a "bottleneck" in China, but now excess capacity appears in some sectors.

The urban construction also takes up a large proportion of the national savings, with the real estate investment reaching about 25 percent. For a variety of reasons, the phenomenon of construction and demolition again and again is seen everywhere.

The investment in rural areas accounts for a low proportion, which is a little more than 3 trillion yuan, and it also is a huge waste, with the phenomenon of building and demolishing houses in rural areas even more severe.

The service industry only accounts for less than 20 percent of the total fixed investments. Among them, the wholesale and retail industry accounts for 2.4 percent, the scientific research and technological service account for 0.5 percent, the education accounts for 1.3 percent, the medical treatment and public health account for 0.8 percent, the resident service accounts for 0.4 and the cultural recreation accounts for 1 percent.

It is worth noticing that the water conservancy, forestry and environmental protection only account for 1.9 percent, Mr. Guo wrote.

Compared with the material capital formation, the human capital formation is perhaps more important.

The average public education expenditure of the high-income countries has accounted for 5.4 percent of their GDP in 2008, that of middle-income countries is 4.5 percent and that of the entire world is 4.6 percent, according to Mr. Guo.

"China is expected to reach 4 percent, a compulsory proportion of the state in 2012," the CSRC Chairman wrote.

In terms of the medical treatment and public health, the average expenditure of the entire world accounts for 9.7 percent of the total GDP, that of the middle-income countries is 5.4 percent, that of high-income countries is 11.2 percent and that of China is 4.3 percent, Mr. Guo wrote.

"Moreover, China's average public capital coverage ratio is also lower than that of other countries," wrote Mr. Guo.

The types of the national savings are different as well.

"The aging of Chinese population is severer than the United States, about 14 percent of population being 60 years old or older, but the accumulated pensions are less," Mr. Guo wrote.

"The overall pensions are only 3 trillion yuan, accounting for less than 7 percent of the GDP of China, and the per capita pension is 2,300 yuan."

According to statistics of the Organization for Economic Co-operation and Development, the pension expenditure of the United States was 73 percent of its GDP in 2010 and the per capita pension was 35,000 U.S. dollars. The proportion is 87 percent in England, 61 percent in Canada and 67 percent in Chile.

Mr. Guo made the conclusion that the structure of saving and investment in China's economy is severely unbalanced.


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