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Cake day: December 1st, 2023

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  • Bloomberg is stock market brained, but more generally China’s extremely high savings rate is regarded as a bad thing, because this is usually due to the combination of high income inequality, low social safety nets, and high housing costs.

    Basically, there are too many poor households in China that are saving excessively due to anxieties about lack of safety nets and high housing costs.

    Low education/financial literacy and poor regulation of financial markets also make Chinese households very risk averse to consuming, investing, or even taking out loans (credit cards are very unpopular). Everyone is just excessively dumping their savings in assets perceived to be safe.

    Once savings are in “safe” assets, they are inaccessible to other productive uses like startups or other loans. This is the exact opposite of a productive economy, and is what the article tried to convey.

    China’s high savings: Drivers, prospects, and policy implications - ScienceDirect - https://www.sciencedirect.com/science/article/abs/pii/S1566014125001049