China’s Savings Rate Remains World’s Highest, Drives Financialization: Zhou Xiaochuan

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The former head of the Chinese central bank has highlighted China’s world-high savings rate as a key factor impacting the growth of its finance sector, as well as the increasing importance of mortgage loans in the national economy.

Former People’s Bank of China (PBOC) governor Zhou Xiaochuan said that China’s savings rate remains the world’s highest at 45%, slipping just five percentage points compared to a decade ago.

According to Zhou the national savings rate has a very sizeable impact on the financial sector as a share of GDP, creating a greater need for financial services.

“A country without savings or only low savings can’t make many loans because it doesn’t have many deposits,” said Zhou.

“Consequently the development of China’s financial sector is significantly related to the savings rates.”

Zhou made the remarks during a speech delivered at the Caijing Annual Conference 2020 (财经年会2020) on 12 November.

Zhou also highlighted the increasing important role played by residential mortgages in China’s national economy.

“This can be generally explained as high-income people making more deposits and low-income people borrowing more,” Zhou said.

“When very high-income people purchase homes they directly use cash. Low-income people must rely on mortgages. For this reason [finance] plays the role of income re-allocation.”

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