Population Structure, Uncertainty And China's High Savings Rate

Since the international financial crisis broke out last year, the problem of China's high saving rate has become a hot topic again. Studies suggest lots of factors having effect on saving rates, among which there are two key factors draw our attention. One is the age structure change of china's population caused by the enforcement of one-child policy, the other are uncertainty factors strengthened by the economic transition process. Those two factors can be used to explain china's high saving rate based on some consumption models. This paper will try to test the underlying relations between those two factors and saving rates.Based on the Life-cycle hypothesis and precautionary savings theory, this paper analyzes the impact of the age structure of the population and uncertainty factors on China's saving rate. Research on 1990-2007 period panel data of china's provinces, we find uncertainty variable and the ratios of retired population to working population both have strong negative effect on household saving rates. We also apply cointegration techniques to national time-series data for the 1978-2008 period and find the national saving rate is cointegrated with the ratios of minors and of retired population to the working-age population and both of these ratios had a negative and significant impact on the personal savings rate.