Why Are Savings Not the Likely Path for China to Increase

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The Answer is Savings is an unlikely path at many levels. Firstly, as discussed in the chapter, it is set to decline for a variety of reasons. Secondly, savings is channeled into investment but China already overinvests-it may be falling into the Singapore trap of too much investment, low returns, and a low steady-state level of consumption. Thirdly, just as in the case of a company, the more savings (retained earnings) the greater the potential for waste (including corrupt use of funds). Last (but not least) China is probably not on the path to an optimal level of consumption at the steady state (as discussed in the chapter-it needs to save less, thereby aiming for a new target steady state with lower savings).
Since the labor force is shrinking, the only real path for China to maintain solid growth rates in the coming years is technological progress.

Why Are Savings Not the Likely Path for China to Increase

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Why Are Savings Not the Likely Path for China to Increase

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