China's savings rate to remain high

Edited and Translated by People's Daily Online

Incentives that have led Chinese households and companies to build up massive savings have not changed enough to reverse the trend and boost domestic demand in the next few years, according to a report recently issued by the International Monetary Fund.

China's household savings rate increased significantly from 1990 to 2007, and its total household savings have hovered around 50 percent of the gross domestic product in recent years, 1 percentage point higher than that of any other countries in the world. According to the Lianhe Zaobao, in addition to the characters of the Chinese people, the country's switch from a planned economy to a market economy has been one of the main reasons for the high savings rate.

During the planned economy period, workers' expenses on housing as well as medical and pension services were all covered by enterprises and governments, so they lacked incentives to save money. After economic reforms started in the 1990s, enterprises stopped covering the expenses, but a sound social security system has not been built yet, which has forced residents to increase precautionary savings.