Apart from accounting for the global divergence in savings rates, tight credit constraints in China might explain the country s high, and rising, savings rate especially as the large rise in national savings is attributable mostly to household savings.

Meanwhile, China s savings rate remains stubbornly high.

Its savings rate has been distressingly low for decades.

In fact, the household savings rate continues to rise.

A country s overall consumption rate is, of course, the flip side of its savings rate.

An economy s current account is the difference between its investment rate and its savings rate.

Household disposable income is about 60 of national income in China, and the household savings rate is close to 30 of disposable income.

The Asia Pacific region has the highest savings rate in the world, although intercountry variations in savings rates have been noticed.

Moreover, as Japan s society ages, the household savings rate will decrease dramatically.

Second, it could absorb excess German savings by letting unemployment rise as local manufacturers fired workers (because rising unemployment forces down the savings rate).

In other words, savings rates in Spain and other deficit countries in Europe had to drop once policy distortions forced up Germany s savings rate.

SMEs and households with net savings stand to gain the most from interest rate liberalization.

Moreover, India has the highest household savings rate in Asia, at 32 of disposable income.

By contrast, China had a fixed investment rate of 41.7 of GDP and a savings rate of 51.9 , reflected in a large surplus.

Another implication of this view is that the steep rise in savings in China is largely driven by a rise in the savings rate of middle aged Chinese (rather than a fall in the borrowing rate of the young).

While the rest of the world struggles to raise savings, China, with a savings rate in excess of 40 , struggles to get its people to consume more.

Conversely, the fall in savings in the US is largely due to higher borrowing by the young (rather than a fall in middle aged Americans savings rate).

In 2007, the United States had a savings rate of 14.6 of GDP, but an investment rate of 19.6 , generating a current account deficit.

As a result, the household savings rate has risen from zero to 4 of disposable income.

When all of these reforms are realized, China s national saving rate may be reduced to 45 , from 51 currently. That will have a very significant effect in terms of reducing the current account surplus, which reflects net national savings.

America s household savings rate was at levels not seen since the Great Depression, either negative or zero.

So bringing the savings rate down is necessary if domestic and external balances are to be achieved.

Of course, some worried about the collapse of the household savings rate, but few were overly concerned.

Of course, China s savings rate will also decline, but Japan s experience since the 1980 s demonstrates how a sharp fall in investment can generate large and persistent current account surpluses, even when the savings rate is falling and the currency is appreciating.

They argue that current account balances reflect national savings and investment rates.

But what China really needs is a greater effort to promote domestic consumption and lower the savings rate.

In 1988, the household savings rate in China and the United States was roughly equal, at about 5 .

And the rest of the world? A global savings glut would suggest that rebalancing the world economy requires policies to boost America s savings rate and to increase non US households consumption.

Although the relative savings positions of Germany and Spain seem to confirm cultural stereotypes, national savings rates have little to do with cultural proclivities.

With a savings rate of barely 4 of GDP, the average US household is unlikely to be over saving.

However, in a country with a large mass of effective savers, the savings rate can rise, rather than fall.

As political tensions in low savings countries grow, so will the risk of these countries abandoning the euro, causing the price that Germany will pay for its distorted savings rate to rise.

BEIJING China s national savings rate has been very high in recent years, amounting to 52 of GDP in 2008 (the most recent year for which statistics are available), and is often blamed for today s global imbalances.

The absence of no money down mortgages might be more important than Confucian ethics in explaining China s high savings rate.

One sure way to reduce the savings rate in China would be to develop an American style mortgage market there.

Yet, by 2007, China s household savings rate had risen to a staggering 30 , compared to just 2.5 in the US.

Of course, some worried about the collapse of the household savings rate, but few were overly concerned. In one of his last articles, Milton Friedman wrote that savings nowadays took the form of houses.

The National (now Central) Bank was created in 1992 based on the Azerbaijan State Savings Bank, an affiliate of the former State Savings Bank of the USSR.

Surplus Chinese savings made possible America s credit expansion between 2003 2005, when the federal funds rate (the overnight rate at which US banks lend to one another) was held at 1 .

53. Reaffirms that the vacancy rate is a tool for budgetary calculations and should not be used to achieve budgetary savings

30. Reaffirms that the vacancy rate is a tool for budgetary calculations and should not be used to achieve budgetary savings

Currency appreciation, Japan argued then and China argues now, is unlikely to result in a significant current account adjustment, which requires addressing not only China s high savings rate, but also low savings in the US.

Productivity and profitability in manufacturing and heavy industries picked up, boosting China s national savings dramatically.

The national illiteracy rate is 17 per cent.

Income growth and a lower household savings rate are essential to the shift in China s growth model, and each presupposes key reforms.