The Changes Of Chinese Resident Savings Rate And Financial Deepening Research

From the Neoclassical growth model established by Solow, the impact toeconomic growth caused by the changes of savings rate has become animportant topic of economists who all consider the growth can be promotedgreatly by raising savings rate despite the different theory frames they havefollowed. At the same time, we have to pay more attention to the restrictionof the key hypothesis S=I, so there is more and more research focusing on therole that finance has played while deciding economic growth rate. Thedevelopment of financial system decides how greatly savings rate canpromote growth.The economic reforms have brought China fast and sustaining economicgrowth rate, and the resident savings rate has grow even faster. But we haveto realize two important contradictions behind the growth. On the one hand,the average resident consumption tendency has kept falling for a long time,and the economic growth in China was affected by the insufficientconsumption level. On the other hand, there is a great gap between thesavings and investments, and some companies which are not state-ownedwere restricted to get enough credit from banks. Therefore, the policy makersand scholars paid a lot of attention to these two contradictions to find how toresolve them. According to their research results, the fast growth of residentsavings was caused by the fast growth of income, the enlarged income gap,precautionary saving and liquidity constraint at the background of all-aroundsocial reforms. The great gap between savings and investments can beregarded as the result of the unfinished financial reforms, the credit allocatingstyle under the old economic system, and imperfect capital market.In chapter 3, we try to discuss the factors which have affected theresident savings rate through empirical analysis. In section 3.1, we makeGranger Causality Test between the savings rate and real GDP growth ratebased on the quarterly data from 1st quarter 1990 to 4th quarter 2004. The testresult indicates that real GDP growth rate is Granger Cause of savings rate,but savings rate isn't Granger Cause of real GDP growth rate. Therefore, wecan get the conclusion that real income growth has promoted savings growthgreatly. In addition, the following reasons can explain why savings ratewasn't the Granger Cause of real GDP growth rate: firstly, there is hugeamount of savings in banks which should has been allocated to companies ascredit; secondly, banks couldn't play well the role of allocating creditresources efficiently, so the companies which are not state-owned but havebetter production and profit encountered great difficulty while trying to getcredit from banks.In section 3.2, we make a Chinese Financial Liberalization Index (FLI)from 1978 to 2004 through Principal Components Analysis according to themethods of Bandiera (1998), which can reflect the comprehensive impact ofChinese financial reforms. Then cointegration theory and error correctionmodel are used to estimate the long run and short run function of Chineseprivate savings rate. The conintegration function is: SYt = ?0.33 + 0.058Lint ?0.02πt + 0.0058rt + 0.0035FLIt ? 0.26GovtSY is savings rate, Linis natural log of per capita disposable income ofurban household, r is real interest rate, πis inflation rate, FLI is financialliberalization index, Govis government savings rate. In the cointegrationfunction, Linand r have significant positive effect on savings rate, πhassignificant negative effect on savings rate, FLI has insignificant positiveeffect on savings rate, Govhas insignificant negative effect on savings rate.We get the same conclusion that income has promoted savings growth greatlyas the one in section 3.1. Three facts have to be concerned to explain theinsignificant effect of FLI to savings rate: firstly, the financial reforms arestill in primary stage; secondly, there are a lot of reversals during the reforms,from regulation to deregulation, and then regulation again; thirdly, financialreforms are not as significant as the other factors, such as precautionarysaving and liquidityconstraint, to affect the resident saving behavior.The error correction model is: ?SYt = 0.0038 + 0.363?SYt + 0.007?rt ? 0.67CEt ?1 ?1In the short run, ?SYt is affected significantly by its 1 lagged variable...