China 's Consumption And Its Consumption

768 Words4 Pages
In order to increase China’s consumption, it is important to figure out feasible policies that the Chinese government could implement to stimulate its consumption efficiently. Anderson (2007) points out China’s firms’ expropriate market share and profits from other countries cause China’s excess savings. Therefore, China’s imbalance economy does not result from low consumptions, but results from Chinese companies’ high profits and their rising savings. The banking system data shows that the household savings rate has fallen in the beginning of the decade. However, the drop in household savings rate is offset by a rise in the enterprise deposit share. This is confirmed by the flow of funds estimates. Although both household and government saving rates are high, neither ratio has changed much over the past five years. Instead, the real driver of the recent Chinese "savings boom" is the corporate sector, in which the estimated gross savings rate has shot up by nearly 7 percentage points since the beginning of the decade. By analyzing sectoral trends in investment and savings, Kuijs (2005) agree with Anderson’s argument: the China’s high savings rate is mainly driven by its high government savings and high enterprises savings. After comparing with other countries, Kuijs points out that the investment by households and the direct investment by the government has been relatively steady at the same levels as other countries. However, the investment by the enterprise sector is
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