Bureau for Research and Economic Analysis of Development Why are Saving Rates of Urban Households in China Rising?

From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to about one quarter of disposable income. Saving rates increased across all demographic groups and the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high saving rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, including constraints on borrowing against future income and low returns on financial assets