Comparing China Savings Rate vs. Select Other Countries

The savings rate in China is very high compared to other countries. The Chinese economy is manufacturing and economy-based while many developed countries’ economies are consumption based. This is one reason why savings rate tend to be low in developed countries.

The following chart shows savings rate in China vs. other countries:

Click to enlarge

Source: Five Things to Know about US-China Trade, Manning & Napier

China has the highest savings rate while the US has the lowest rate. While there are a multitude of reasons for the high savings rate in China, two factors that make a difference are cultural and financial  factors. For example, in China children are expected to take care of their parents when they retire. As a result young Chinese not only have to save for themselves but also for their parents. In the US, personal freedom and independence is highly important and parents do not expect their children to support them financially at old age.

Another point to remember is that the social safety is weak or non-existent in China especially in regards to pensions. Hence Chinese are indirectly nudged to save higher portion of their earnings for use in retirement. In the US, social security ensures retirees have some of income during retired life.

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