Many commentators deplore the imbalances that are distorting the global economy. The crucial imbalance is China’s tendency to save too much and the U.S. penchant for spending too much. Economists usually blame this imbalance on China’s policy of pegging the renminbi to the U.S. dollar. But the real culprit may be something far more human — the desire of Chinese families to attract a bride for their sons.
Shang-Jin Wei, a professor of economics at Columbia University, has co-authored a fascinating paper, Why Do the Chinese Save So Much? He points out that the Chinese have not always been such ardent savers. The household savings rate in China was 16% of disposable income in 1990; today it is more than 30%.
What is to account for the rise? Wei and his co-author, Xiaobo Zhang of the International Food Policy Research Institute, point to the growing disparity between the sexes. China’s policy of allowing families to have only one child, and the preference of many families for boys, has led to a situation in which 122 boys are being born for every 100 girls. The surplus of Chinese boys means that one fifth of men will not be able to find a wife in China when they grow up.
Wei and Zhang speculate that families are trying to increase their sons’ chances in the marriage market by saving large amounts of money. To test their theory, they compared savings rates among regions and between families with daughters and families with sons. Just as they expected, they found that families with sons tended to save more than families with daughters. Families in regions with the most skewed sex ratios tended to save more than families in regions with a smaller preponderance of boys.
Wei and Zhang believe that about half the growth in the Chinese savings rate over the past 25 years can be attributed to the growing imbalance between the sexes. That suggests that trying to reduce the Chinese savings glut is going to be a longer and harder process than most people think. It’s not just a matter of changing an exchange rate. It’s a matter of changing a society.
Freelance business journalist Ian McGugan blogs for the Financial Post.