In a recent speech Zhou Xiaochuan gave a nice clear summary of the reasons for Asian economic exceptionalism and the cultural (and therefore apparently mostly unchangeable) roots of China’s current high savings rate. He is doing this for contemporary political reasons of course, trying to claim that the Chinese government cannot change the savings rate. I’m not as interested in that debate, but this is a nice resource for anyone teaching East Asia and looking for a good, recent, official summary of a fairly cultural determinist vision of China’s rise.
Tradition, cultural, family structure, and demographic structure and stage of economic development are the major reasons for high savings ratio in the East Asia. First, the East Asia countries are influenced by Confucianism, which value thrift, self-discipline, zhong yong or Middle Ground (low-key), and anti-extravagancy. Second, we may be able to trace the cultural differences from a large number of textbooks and literature of different countries. For instance, the Latin American countries have similar levels of national wealth as the East Asian countries but lower savings ratios. This can be attributed to the cultural differences in the region, where people have a higher propensity of consumption and tend to quickly use up all their salaries. Third, family tie is strong in the East Asian countries, and families shoulder social responsibilities such as providing for the elderly and bringing up children. Fourth, according to the Life Cycle Hypothesis by Franco Modigliani, more money is saved to meet future pension and healthcare needs as the share of working age population increases. When we study the phases of economic growth, in times of exceptionally high economic growth, most of the incremental income will be saved, resulting in an unusually high savings ratio. China fits in the above-mentioned two conditions for a high savings ratio. Japan and the U.S. can also demonstrate the contribution of these factors in determining savings ratio. Similar to the U.S., Japan is a developed country with high per capita income. The social security systems in the two countries have their respective weaknesses. However, Japan’s savings ratio is much higher than that in the U.S. This can be largely ascribed to cultural, family value and demographic feature in Japan, which are fairly similar to those in other East Asian countries.