TY  - JOUR
AU  - Chamon,Marcos
AU  - Prasad,Eswar
TI  - Why are Saving Rates of Urban Households in China Rising?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14546
PY  - 2008
Y2  - December 2008
UR  - http://www.nber.org/papers/w14546
L1  - http://www.nber.org/papers/w14546.pdf
N1  - Author contact info:
Marcos Chamon
Research Department
International Monetary Fund
HQ1-09-612
700 19th Street, N.W.
Washington DC, 20431
E-Mail: MCHAMON@imf.org

Eswar S. Prasad
Dyson School of Applied Economics and
Management
Cornell University
440 Warren Hall
Ithaca, NY 14853
Tel: 607/255-5687
Fax: 607/255-9984
E-Mail: eswar.prasad@cornell.edu
AB  - From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. Saving rates have increased across all demographic groups although the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high saving rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, as reflected in constraints on borrowing against future income and low returns on financial assets.
ER  -