Understanding Changes to Chinese Urban Savings Rates, Report Shanghai University of Finance and Economics Scholars

Title: The Mystery of China's Urban Household Saving Rate (中国城镇家庭储蓄率之谜—基于年龄—时期—组群分解的再考察)
Journal: China Industrial Economics (中国工业经济)
Authors: Wang Wei, Shanghai University of Finance and Economics (汪伟); Wu Kun, Shanghai University of Finance and Economics (吴坤)
Link: https://bit.ly/2SJhQZ0
Publication: July 2019

• Prior to 1995, urban Chinese families with heads of household in their 40s and 50s had the highest savings rates in the country as compared to other age groups. However, since the mid-1990s, a shift has taken place, where urban heads of household in their 40s and 50s now have the lowest rates of saving.

• Wang and Wu argue that the greatest explanation for this shift in savings rates are reforms introduced in the mid-1990s affecting higher education, which led to tuition increases. These new higher costs of education have created financial strains for parents with children in college that were not present before.

• Wang and Wu warn this phenomenon has the potential to exacerbate wealth inequality. As China’s economy enters its next phase, the state should invest in public education to reduce the tuition burden for low- and middle-income families, they write.

Note: CASS publishes the China Industrial Economics Journal.