Investment and Saving in China

The author analyzes sectoral patterns of investment and saving in China-over time and compared with other countries-to shed light on the factors driving high investment and on how saving is channeled into investment. The findings inform several policy debates. Key findings include: (1) investment by enterprises distinguishes China from other countries and explains most of the variation over time; (2) high household saving explains only a part of the large difference in national saving between China and other countries-the majority is explained by high saving of the government and enterprises (through retained earnings); and (3) only about one-third of enterprise investment is financed via the financial sector, a lower share than in the early 1990s. The author also explores explanations behind high saving of the government and enterprises. His findings have three sets of policy implications. First, the identified financing patterns put in perspective the exposure of the financial sector to investment-related risks but, against a background of concerns about suboptimal allocation of capital, bring to the fore corporate governance, dividend policy, and transparency and accountability of public funds. Second, the findings suggest policy adjustments that would help in achieving the government's goals of improving the quality of growth and increasing the role of consumption. Third, long term saving prospects and the impact of financial sector and pension policies are discussed.

Bibliographic Details

Main Author:	Kuijs, Louis
Language:	English
Published:	World Bank, Washington, DC 2005-06
Subjects:	ACCOUNTABILITY, ASSETS, AUDITING, AUDITORS, BANK LOANS, BANKING SECTOR, BANKING SYSTEM, BONDS, CAPITAL FORMATION, DEFICITS, DEMOGRAPHICS, DEPOSITS, DIRECT INVESTMENT, DISPOSABLE INCOME, DIVIDEND PAYOUT, DIVIDEND POLICIES, DIVIDEND POLICY, DIVIDENDS, DOMESTIC INVESTMENT, DOMESTIC SAVING, DOMESTIC SAVINGS, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIC OUTLOOK, ECONOMIC STRUCTURE, EFFICIENCY OF CAPITAL, EMPIRICAL ANALYSIS, EMPIRICAL EVIDENCE, EMPIRICAL STUDIES, EMPLOYMENT, EXCHANGE RATE, EXPENDITURES, EXTERNAL BORROWING, EXTERNAL FINANCING, FINANCIAL INSTITUTIONS, FINANCIAL MARKETS, FINANCIAL RESOURCES, FINANCIAL SECTOR, FISCAL POLICY, FIXED ASSET, FIXED ASSETS, FIXED CAPITAL, FOREIGN DIRECT INVESTMENT, FOREIGN INVESTMENT, GDP, GOVERNMENT BONDS, INCOME, INVENTORIES, LIFE CYCLE HYPOTHESIS, M2, MACROECONOMIC POLICY, OPERATING SURPLUS, PER CAPITA INCOME, PRIVATE CONSUMPTION, PROFITABILITY, RECAPITALIZATION, RETAINED EARNINGS, SAVINGS, STATE ENTERPRISES, TIME SERIES, TRANSPARENCY, TRANSPORT, TROUGH, VALUATION, VALUE ADDED, WEALTH,
Online Access:	http://documents.worldbank.org/curated/en/2005/06/5860590/investment-saving-china https://hdl.handle.net/10986/8319
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