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Savings and Investment
in the PRC
One of the most prominent characteristics of the PRC's economy
has been its people's high propensity to save. This has occurred
more as a result of a lack of consumer goods than a genuine desire
to save, however. During the 1980s average gross domestic saving
as a percent of GDP was 32.5% - higher than any other country in
Asia - and during its peak in 1990, gross domestic saving in the
PRC reached 39.2%. Coupled with this as been a high propensity for
the government and TVEs to reinvest in capital construction projects.
Except for 1990 and 1991, gross domestic investment as been consistently
higher than gross domestic savings - with an average of 34.6% of
GDP during the 1980s. Again - as with gross domestic savings - gross
domestic investment, as a percentage of GDP is higher in the PRC
than anywhere else in Asia.
Graph 8
Savings and Investment
in the PRC
Note: Figures are calculated as a percentage of
GDP. Data for 1992 is estimated. Source: ADB, Asian Development
Outlook 1991, Tables A7 and A8.
Graph 8 displays the recent trends in the PRC's savings and investment
ratios. As depicted, there has occurred in the PRC a general trend
to save more and invest less, with the differential between savings
and investment of 4.8% of GDP in 1985 being narrowed to zero in
1992. The situation occurring in 1990 - where savings reached 39.2%
of GDP - is unlikely to continue. As previously discussed, 1988
- 1990 represented a period of strictly enforced austerity measures
in the PRC, and severe shortages of consumer items meant that there
was even less for Chinese citizens to spend their savings on than
usual.
It is likely that high levels of gross domestic savings and investment
will continue into the foreseeable future. Only when the PRC's manufacturing
sector can cope with the domestic demands of one billion people
will be any significant change in savings rates. Until that time,
as the PRC government and TVEs continue to invest in capital construction
projects, gross domestic investment will also continue to take up
a sizeable share of GDP.
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