Jiang Chao: Why does China’s savings rate continue to decrease?
Author: Jiang Chao, Source: Haitong Securities, the original report titled “savings rate of cause and effect – how to look at the savings deposit rate of change” Investment Highlights higher savings rate, but continued to decline.
The saving rate refers to the proportion of the balance used for final consumption in disposable income, which reflects the savings potential of the country’s entire society.
China’s national savings rate and household savings rate are both high.
China’s National Capital Reserve in 201747.
0%, well above the world average saving rate of 26.
5%, which is also higher than the average of developing economies and mergers.
Further analysis can find that the previous national savings accounted for the largest proportion of household savings, and the local household savings rate was much higher than other growth.
Due to the country’s diligence and thrift, this is because of the traditional culture of diligence and family ownership, but most of the real estate investment is included in household savings.
However, the budget funding rate continues to decrease.
Around 2008, the national savings rate and household savings rate of each country showed a clear downward trend, and the proportion in 2017 decreased by 5 in 2008.
8 and 1.
1 北京夜网 unit.
Why does the annual savings rate decrease?
What effect will a decline in the savings rate have?
The experiences of other countries may give us some inspiration.
Causes and consequences of declining savings rates in various countries.
In fact, many countries have experienced a decline in the savings rate. For example, Japan has experienced a long period of decline in the savings rate since the 1990s, and the United States also experienced a decline in the savings rate from the 1980s to the late 1990s.
Antecedents: Look at the population in the medium and long term, and look at the economy in the short term.
In the medium and long term, the savings rate is closely related to the population structure. When the labor force is relatively large, income growth will be faster than consumption, resulting in an increase in the savings rate.
During the same period, the savings rates in Japan and the United States fell, and the proportion of the population aged 15-64 also declined significantly.
However, the two short-term declines in the US savings rate since 1998 are because the short-term changes in income growth are greater than consumption.
At the time, the financial crisis led to a marked expansion in economic growth, but consumer spending was reduced, and the decline was reduced.
Consequences: Investment falls, or foreign debt soars.
First, a decline in the savings rate means less demand for real estate purchases, with downward pressure on house prices.
Japan’s housing prices have continued to fall since the 1990s, and the growth rate of American housing prices is closely related to the rate of savings.
More importantly, the continued decline in savings rates will lead to a decline in investment growth.
After 90 years, Japanese investment growth once overlapped to -8%, and there was also a clear positive correlation between the US savings rate and investment growth.
The decline in investment growth means that investment-driven economic growth is no longer sustainable.
After the 1990s, the average value of Japanese investment’s GDP pulling rate was basically zero. Affected by this, the center of Japan’s GDP growth also moved down significantly.
And if investment continues to grow at a high rate when the savings rate declines, it may face a surge in foreign debt and trigger a currency crisis.
Brazil, Thailand, and Argentina have actually experienced an increase in the size of their external debt due to an investment rate greater than the savings rate. The three have expanded their external debt by 66%, 416%, and 128%, respectively. Subsequently, several countries also experienced short-term local currencySignificant depreciation of time and a significant deterioration in GDP growth.
The decline in the savings rate has been set, and the economy urgently needs to transform.
Going back, the decline in the expected savings rate is also clearly related to changes in the demographic structure.
Accelerating population aging has led to a decline in the savings rate.
In the ten years after 2009, the proportion of the population aged 15-64 years has shown a slow trend, and this is the direct reason for the decline in expenditure.
At present, the trend of population aging is not expected to change, and the proportion of the working age population is expected to exceed 5 percentage points by 2030.With the proportion of the labor force continuing to decline, the decline in the savings rate is an inevitable trend.
Investment is difficult to maintain high growth, and the economy urgently needs to transform.
The decline in the savings rate will lead to a decline in investment growth, and the proportion of investment that has been in GDP since 2011 has also declined.
For a long time, investment has been the main force driving the growth of the national economy. The decline in the savings rate and the long-term investment growth rate have remained at a high level as before. It is bound to change from an investment-driven economy to a consumption innovation-driven economy.
In addition, the decline in the savings rate reflects the population structure. The actual effective demand for internal housing will gradually decrease in the future, and it is difficult to reproduce the nation’s housing expansion.
The current savings rate is high, but it continues to decline. According to the National Bureau of Statistics’ definition, total savings refer to the disposable income as the balance after final consumption.
Specifically, total national savings includes the sum of savings of residents, businesses, and governments, such as the surplus income of the country that did not use consumption in that year, which belongs to the concept of flow.
According to the definition, the national savings rate can be divided by the total national savings divided by the national disposable income, but when making country comparisons, we are used to approximate the national savings rate by dividing the total national savings by GDP.
The national savings rate of GDP is relatively high both in terms of overall and budget.
The national savings rate reflects the budgetary expenditures of the entire society in the country. Generally, the development of the savings rate will change due to the better social security system. At the same time, the savings rates of Asian countries are relatively high due to differences in cultural habits.
According to IMF statistics, China’s national capital reserves were 47 in 2017.
0%, well above the world average saving rate of 26.
5%, which is also higher than the average of developing economies and mergers.
The US and the UK have savings rates of 18 respectively.
1% and 13.
0%, the expected savings rate is equivalent to 2 of these two countries.
6 and 3.
Further analysis reveals that national savings account for the largest proportion of GDP.
As mentioned earlier, national savings are divided into household savings, government savings, and corporate savings.
Overall, the national household savings in 2016 was 16.
6 trillion yuan, which is 1 higher than corporate savings in the same year.
8 trillion yuan, 14 higher than government savings.
In terms of percentage, in 2016, household savings accounted for 48% of national savings.
8%, close to 50%, it can be said that domestic household savings have the greatest impact on total national savings.
And the savings rate of these residents is much higher than other accumulations.
Dividing household savings by household disposable income gives the household savings rate, which reflects the savings potential of the household sector.
According to OECD statistics, the three countries with the highest household savings rates in 2016 were Switzerland, Sweden, and Mexico, with values of 18 respectively.
At 45%, UK residents have the lowest savings rate at just 1.
In 2016, the household savings rate was as high as 36.
1% is about 2 times the saving rate of Swiss residents and about 22 times the saving rate of British residents.
There are multiple reasons for the high savings rate of Chinese residents. First, traditional Chinese culture promotes diligence and family ownership. Residents have always been accustomed to saving. Second, property in the past few decades is the main investment method for residents.In the future, most of the consumption calculated by rent will be included in household savings.
However, the long-term budget national savings rate and household savings rate both showed a significant downward trend.
Before 2000 to 2008, the expected savings rate experienced a period of rapid rise.
The national savings rate was 35 from 2000.
6% surged to 51 in 2008.
8%, an increase of 16.
2 digits; while the household savings rate was from 28 in 2000.
2% rose to 37 in 2008.
3%, an increase of 9.
Since then, the rate of income savings has begun to slowly decline, and the national savings rate has fallen below 50% in 2011, and gradually decreased in 2017 with reference to 20085.
8 people; the proportion of household savings rate also gradually decreased in 20081.
So why is the budget saving rate going down?
What effect will a decline in the savings rate have?
The experiences of other countries may give us some inspiration.
Causes and consequences of declining savings rates in various countries2.
1 Antecedents: Looking at the population in the medium and long term and looking at the economy in the short term In fact, many countries have experienced a decline in savings rates.
Since the 1990s, Japan has experienced a long period of declining savings rates.
Japan’s national savings rate reached a high of 34 in 1991.
After 2%, it started to oscillate and drifted to an all-time low of 27 in 2016.
At the same time, the savings rate of Japanese residents also continued to decline, even showing negative values between 2013 and 2015, reflecting that Japanese residents were even borrowing money at that time.
The national savings rate of the United States ushered in a decline process in the 1980s, after 1998 a major shock.
In the early 1980s, the US savings rate began to decline continuously, from a peak of 23.
4% all the way down to the lowest point in 199317.
Since then, the savings rate has started to pick up. Until 1998, the US savings rate began a new round of adjustments, showing significant fluctuations.
There were two significant declines and at least the course of the period, with the lowest points reaching 17 in 2003 and 2009 respectively.
5% and 14.
In the medium and long term, the savings rate is closely related to the population structure.
Demographic changes have a fundamental impact on a country’s savings rate, mainly because most people aged 15-64 can earn wage income through work.
When their income level exceeds the consumption level, the surplus will be used as savings instead of part of household savings.
When people are in their infancy before the age of 15 or in their old age after the age of 64, they do not have the ability to earn income.
At this time, their pure consumption activities will lead to a decline in household savings.
Therefore, both the household saving rate and the national saving rate will be transformed into a decline in the proportion of the population aged 15-64 to the total population and continue to decline.
The root cause of the continued decline in Japan’s savings rate is the demographic adjustment brought about by the aging population.
As mentioned earlier, Japan’s national savings rate and household savings rate have continued to fall since 1991, and the proportion of Japan’s population aged 15-64 also reached a high point and continued to decline in 1991.
The proportion of Japan’s population aged 15-64 has fallen to 60 in 2017.
1%, a gradual decline of about 9 in 1991.
The changes in the national savings rate of the United States in the 1980s and 1990s were also related to population structure.
In the early 1980s, the proportion of the population aged 15-64 years in the United States reached a stage high, and then it continued to decline.
During the same period, the national savings rate of the United States also fluctuated steadily and gradually declined6.
Since 1993, the proportion of the population aged 15-64 in the United States has begun to rise slightly. At the same time, the national savings rate of the United States also stopped falling and began to rebound.
But then the US savings rate began to fluctuate, which cannot be explained by changes in demographics.
The short-term fluctuation of the US savings rate is mainly due to the increase in the growth rate of household income over consumption.
By definition, saving refers to the difference between income and consumer spending.
Therefore, when the growth rate of income exceeds the growth rate of consumption expenditure, the savings rate will rise; conversely, when the growth rate of income is less than the growth rate of personal consumption expenditures, the savings rate will decline.
Due to the bursting of the Internet bubble in 2000 and the 2008 subprime mortgage crisis leading to economic growth in the United States, residents’ incomes have declined significantly, but consumer spending is substantial, and people’s demand for daily necessities will not reduce income but decrease by the same proportion.
Therefore, around 2000 and around 2008, the slowdown in the growth of personal consumption expenditure in the United States was smaller than the change in the growth rate of GDP, resulting in a significant reduction in the US savings rate during the shock.
2 Results: If investment falls, or foreign debt soars, what are the consequences of the decline in savings?
Falling savings rates mean less demand for real estate purchases, and downward pressure on yields and prices.
The highest, the decline in the savings rate actually reflects changes in the demographic structure. The decline in the proportion of 15-64-year-olds will lead to a reduction in rigid demand for houses; the decrease in expenditures will result in a reduction in the funds available to residents to purchase new homes, and will also reduceDemand.
Under the combined effect of the two, falling housing purchase demand will cause real estate prices to continue to fall.
The Japanese real estate market is a good example.
We can see that since 1990, the average price of newly-built apartment buildings in the Japanese capital circle has shifted to a reduction in the household savings rate. The decline in house prices has the distortion effect of the bursting of the real estate bubble, but the reduction in the saving rate is alsoAn important reason that cannot be ignored.
After 2002, the savings rate of Japanese residents began to rise, and house prices gradually stopped falling and rose slightly thereafter.
More importantly, the continuous decline in the savings rate will lead to short-term investment growth, which often means that investment-driven economic growth is no longer sustainable.
From the perspective of economics, the total consumption and total investment of the government, residents and enterprises constitute the total demand of a country, and the total consumption and total savings constitute the total income of a country. Without considering the balance of payments, the savingsThe level of investment determines the level of investment.
Therefore, when the savings rate of a country declines, the proportion of investment in GDP will also decline, and the growth rate of investment will obviously decrease.
During the period of high-speed economic development, there is usually a rapid rise in the savings rate, which provides a funding foundation for investment expansion. However, when the savings rate continues to decline and drags down the investment growth rate, it may fall into low growth if the economy cannot complete the transformationInterval.
Judging from Japan’s historical experience, the decline in the savings rate has indeed led to a significant decline in investment growth.
Since 1990, Japan ‘s national savings rate has continued to decline. During the same period, Japan ‘s investment growth rate once slid from a high of 10% to -8%, and has since hovered around 0%.
After the decline in investment growth rate, the contribution rate of investment to GDP has also decreased significantly. The average driving rate of investment to GDP growth in the 1980s and 1990s was 1.
There are about six black people, and the average value after the 1990s is basically zero.
Affected by this, the center of Japan’s GDP growth also moved down significantly around the 1990s.
From the data in the United States, the savings rate is also very closely related to house prices and investment.
The growth rate of the US savings rate and the average price of new home sales shows a clear and same relationship.
The national savings rate has plummeted since 1980, driving house prices to start falling.
Around 1990, the saving rate started to rise slightly, and the growth rate of house prices also rose abruptly.
At the same time, there is also a clear positive correlation between the US savings rate and investment growth, and the trends of the two are generally consistent.
In 2009, the growth rate of the US national savings rate and total private investment reached historical lows at the same time, which were 14 respectively.
6% and -21.
However, does the decline in the savings rate necessarily mean a replacement for investment growth?
If the country’s investment rate continues to increase while the rate of savings has fallen, what are the consequences?
Let’s take a look at Brazil’s experience.
Brazil has experienced a decline in the savings rate but investment has not declined.
As mentioned earlier, without considering the balance of payments, the savings rate determines the investment rate. If the savings rate decreases, but the investment continues to increase, then foreign debt needs to be transferred.
After 1993, Brazil’s savings rate dropped significantly, and by 1999 it had fallen to 10 once.
6%, while the proportion of investment in GDP in the same period has remained above 17%.
Because the savings rate can’t keep up with investment growth, Brazil can only maintain high investment through borrowing abroad.
Therefore, at a time when investment was above savings, the size of Brazil’s external debt soared, from 1457 in 1993.
300 million US dollars rose to 2414 in 1999.
7 billion US dollars, a rise of 65 in six years.
The rapid rise in the size of external debt has caused huge pressure on the domestic currency, and eventually triggered a financial crisis.
With the increase in foreign debt, the Brazilian real, the real, is also depreciating.
Between five years, the real exchange rate was 0 from December 1993.
12 reais / dollar rose to 1 in December 1998.
21 reais / dollar.
In January 1999, the Brazilian government was forced to officially announce the expansion of the exchange rate. The real devaluation of the real in two months was more than 60%.
The severe depreciation of the Brazilian currency in 1999 also caused various levels of stock market shocks in Latin American countries, which triggered a financial crisis. In that year, Brazil ‘s real GDP growth rate also shifted to zero.
Obviously, Brazil is not alone, and Thailand and Argentina have also experienced investments exceeding savings and pushing up the size of external debt.
From 1988 to 1996, the investment rate of Thailand exceeded the savings rate. Among them, the ratio of Thai investment to GDP exceeded the savings rate by eight ratios in 1990.
During this period, Thailand’s external debt expenditure increased from 210 in 1988.
$ 600 million rose to 1087 in 1996.
400 million US dollars, a nearly fourfold increase.
From 1991 to 2001, the investment rate in Argentina has always been higher than the savings rate, the difference of which reached 4 in 1998.
During this period, Argentina’s external debt also expanded rapidly, rising by as much as 128% in ten years.
After 2013, Argentina has repeatedly overlapped, and the size of its external debt has further climbed to US $ 190.5 billion in 2016.
The rise in the size of external debt has also led to the severe devaluation of the currencies of these two countries and has developed into a financial crisis.
In 1997, the Southeast Asian financial crisis broke out, and the exchange rate of the US dollar against the US dollar and the Thai baht increased sharply from 24 to 53 during the six months, gradually decreasing the value by 50%.
Affected by this, the Thai economy has also been hit hard. In the fourth quarter of 1997, GDP growth fell to -6.
The Argentine currency experienced a significant depreciation of the exchange rate in 2002 and 2018.
Among them, the Argentine government was forced to abandon the fixed exchange rate system in 2002, with a margin of over 70%, and the depreciation of the Argentine peso in 2018 also reached 50%.
The currency crisis caused by the devaluation of the exchange rate, Argentina’s GDP growth rate in the first quarter of 2002 replaced -16.
3%, and Argentina ‘s GDP growth rate fell to below -3% in the third and fourth quarter of 2018.
The decline in the savings rate has been determined, and the economy urgently needs a transitional return. The expected decline in the savings rate is also obviously related to changes in the population structure.
As we have previously analyzed, changes in the saving rate are essentially changes in the demographic structure, and data show that changes in the saving rate are also closely related to the demographic structure.
Before 2008, the proportion of the population aged 15-64 years before maintained a steady upward trend, from 55 in 1970.
7% rose to 73 in 2008.
During the same period, the national savings rate of developing countries also rose from 28 in 1970.
9% climbed to 51 in 2008.
However, due to the accelerated aging of the population, the proportion of the 15-64 year-old population in the total population has slowly changed since 2009, and this is the direct reason for the decline in expenditure reduction.
At present, the trend of population aging is expected to remain unchanged.
The continued decline in the birth rate at the end of the 1980s has led to a relatively low proportion of the population in the current age range of 0-35, so that the population of the 40-60 age group will enter the elderly interval in the next 20 years.It is expected that the proportion of the working-age population may exceed 5 percentage points by 2030.
The development of the economic level has led to a continuous change in people’s perceptions, and more and more people have gradually become or not born, and even led to the gradual liberalization of family planning policies, but usually the birth rate remains low.
If the birth rate cannot be recovered in the future, the problem of aging will be further exacerbated.
With the proportion of the labor force continuing to decline, the decline in the savings rate is an inevitable trend.
As previously analyzed, the proportion of people aged 15-64 is declining. The proportion of residents who have a reasonable income through work will continue to change. More and more people will become sources of income but still maintain consumption.
In this case, the expected savings rate will gradually decline.
The decline in the savings rate will lead to a decline in investment growth.
Based on the historical experience of other countries, we should recognize that a country cannot maintain a decline in savings rates but maintain a state of high investment.
The proportion of investment that lasts for many years exceeds the proportion of savings will directly cause a country to face currency devaluation due to excessive foreign debt, and may even lead to an economic crisis in severe cases.
Therefore, while the savings rate continues to fall, the investment rate must also fall.
In general, the proportion of long-term investment in GDP has indeed changed since 2011, and the ten-year growth rate of fixed asset investment has also increased from 23 in 2011.
8% fell to 5 in 2018.
Of course, the growth rate of investment last year exceeded some big ones, but the long-term long-term trend of investment remains unchanged.
The economic model driven by investment is unsustainable and the economy urgently needs transformation.
For a long time, investment has been the main force driving the growth of the national economy. Among them, real estate investment is connected with the upstream and downstream needs of the real estate industry chain, and infrastructure investment is an important driver of the Totodi economy.
However, the investment-driven economic growth model has led to high debt, and the decline in the saving rate has to maintain the investment growth rate at a high level as before. It is bound to change from an investment-driven economy to a consumer innovation-driven economy.Several years of major policies have also been adjusted in this direction.
In addition, it is difficult to reproduce the growth of national housing prices in the future.
After the rapid growth of housing prices over the past years, the current housing prices have far exceeded the normal burden of residents.
The decline in the savings rate reflects the demographic problem. The decline in the savings rate means that the funds available to buy new homes are decreasing. At the same time, the continuous decline in the proportion of people aged 15-64 means that consumer groups with rigid demand for housing accountThe ratio is also decreasing.
Since 2011, the area of newly started housing has been falling from a high point. Although the monetization of shed reform has caused a rebound in the past two years, the trend has continued to decline in the medium and long term.
Therefore, from the perspective of the savings rate and the age-appropriate population, the actual effective demand for housing has been declining, and it is difficult to reproduce the situation of the expansion of the country’s housing scale.