Report
The huge gap in savings rates between China and the rest of the world: What implications?
China’s savings rate is considerably higher than that of the rest of the world. There are then two possible equilibria: Due to the controls on capital outflows from China ( which is the case at present), the gap in savings rate s leads to faster accumulation of capital in China than in the rest of the world and, relative to growth, lower interest rates in China than in the rest of the world. In this equilibrium, China grows faster than the rest of the world but accumulates partially inefficient capital, leading to the risk of financial instability; Without the controls on capital outflows from China, the gap in savings rates, compared with the current situation, would lead to a large external surplus in China combined with a real depreciation of the renminbi, large capital outflows from China, a much higher interest rate in China and a lower interest rate in the rest of the world , slower accumulation of capital (but efficient capital) and lower growth in China , although higher growth globally.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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