Corporate Saving, Household Saving, and Gross National Savings: Analysis by Provincial Panel and Time Series Data in China

Abstract

The current account imbalance between the U.S. and China is the principal cause of the ongoing trade friction. China’s domestic savings, which have exceeded domestic investment for many years, are flowing into the U.S. We sought to explain why China saved so much in terms of all of gross national, household, corporate, government, and other savings from 1952 to 2020. We prepared two sets of time-series data based on the SNA and deposits in domestic banks, and compared them. Over the 69 years (1952-2020), corporate saving was the largest source of domestic saving, except from 1988-2007. Household saving was determined by income growth, consumption habits, income distribution, social security payments, the desire to bequeath money, the one-child policy, and speculative saving. To explore corporate saving, we performed panel regression analysis by estimating provincial corporate saving by “certain-sized industries” from 2000 to 2010. All of the Tobin marginal Q, minimum wage growth, the private enterprise ratio, the corporate income tax rate, and population growth significantly impacted corporate saving.

KEYWORDS:

• Corporate saving
• household saving
• national saving
• Tobin marginal Q
• minimum wage
• private enterprise ratio
• corporate income tax
• population growth

Acknowledgments

The author thanks Charles Yuji Horioka, Hung-Gay Fung (the editor of this journal), Masao Ogaki, and Kevin Honglin Zhang (the associate editor of this journal) for their encouragements and beneficial suggestions. The author also thanks Yan Gao for his research assistance. Any remaining errors here are the author’s responsibility.

Notes

1 The theoretical generation overlap model was used to analyze the effects of the one-child policy and consumption habits, and the Chinese domestic savings rate trend was then derived (Horioka and Wan, June 21, 2006; Wan, August 7, 2006). These reports (in Chinese) indicated that China’s domestic savings rate would begin to decline in 2011 after peaking in 2010. The history of the two Chinese documents is as follows: The author presented a seminar paper (in English) entitled: “Why Does China Save So Much?” (by Charles Yuji Horioka and Junmin Wan) at the China Center for Economic Research (CCER) of Peking University on Wednesday June 21 2006 (13: 30-15: 00). In the paper, the domestic and household saving rates were analyzed from both theoretical and empirical perspectives. Many faculty members and graduate students from Peking University attended; a lively discussion (in English) ensued. Immediately thereafter, the seminar talk and question-and-answer session were transcribed (in Chinese) by CCER; the transcript was entitled “The 591^th (the 29^th of 2006) Policy Research Brief; Horioka and Wan, June 21 2006”; [five single-spaced A4 pages]). A supposed summary of the seminar talk (in Chinese) (Liao Wang Weekly, Xinhua, August 7, 2006, one single-spaced A4 page) was not written by the author and is not known to the author. In terms of corporate savings, the attributions were made to the owners of the companies. As each owner is part of a household, the corporate savings are indirectly (but essentially) household savings in a broad sense.

2 There were about 40.04 million more males (0-59 years-old) than females (0-59 years old), 38.42 million more males (0-49 years-old) than females (0-49 years old), and 34.44 million more males (0-39 years-old) than females (0-39 years old) in 2019, respectively, via the author’s estimation based on the data of Table 2-9 (page 37) of China Statistical Yearbook 2020.

3 An alternative explanation would be that the private firms are more profitable than the SOEs as described by Fung and Leung (2001).

Additional information

Funding

This research was partially supported by Research Grant of the Trust Companies Association of Japan in 2016, and the JSPS KAKENHI Grant (#16K03750). The author gratefully acknowledges the support of these funds.