China Comparing saving with other countries by hongkonguniv

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									China: Comparing Saving with Other Countries

Doris Kwok 2008

Investment and Saving in China

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China: Comparing Saving with Other Countries

Doris Kwok 2008

Investment and Saving in China

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Source: World Development Indicators Database via NationMaster

Doris Kwok 2008

Investment and Saving in China

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Source: World Development Indicators Database via NationMaster

Doris Kwok 2008

Investment and Saving in China

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Source:

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Investment and Saving in China

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What are the factors driving China’s high investment? & How is saving channeled into investment?
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By Enterprise Sector

Investments
By Government By households

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Investment and Saving in China

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Investment (percent of GDP)

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Investment and Saving in China

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1/ Investment by the enterprise sector distinguishes China from other countries…

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Investment and Saving in China

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Contributions to Funding Enterprise Investment ?

?

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Investment and Saving in China

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How is saving channeled into enterprise investment?
Enterprise

Saving Government Households

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Investment and Saving in China

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Saving (percent of GDP) by High household saving driven

 

Economic growth Change in demographics

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Investment and Saving in China

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How is saving channeled into enterprise investment?
Own Saving

Enterprise Savings
Government Households Bank borrowing

Net External Financing Net Capital Transfer

Doris Kwok 2008

Investment and Saving in China

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Saving (percent of GDP)

High government saving is a result of



Policy favouring government-financed Doris Kwok 2008 Investment and Saving in China investment over government consumption. 14

How is saving channeled into enterprise investment?
Capital Transfer
Own Saving Net External Financing Net Capital Transfer

Enterprise Savings
Government Households Bank borrowing

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Investment and Saving in China

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Saving (percent of GDP) High enterprise saving driven by
Increasing profitability caused by restructuring of SOEs  Low dividend policy  Doris Kwok 2008 intensive industry China Capital Investment and Saving in 16


How is saving channeled into enterprise investment?
Capital Transfer
Own Saving

Enterprise Savings
Government Households

Retained Earnings Bank borrowing

Net External Financing Net Capital Transfer

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Investment and Saving in China

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Contributions to Funding Enterprise Investment (percent of total)
Government Capital Transfer
>50% from retained earnings of the enterprise!

Own Saving Net External Financing Net Capital Transfer

Bank Loans FDI

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Investment and Saving in China

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Contributions to Funding Enterprise Investment (percent of total)

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Investment and Saving in China

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What are the factors driving China’s high investment? & How is saving channeled into investment?
Doris Kwok 2008 Investment and Saving in China 20

1/ Investment by the enterprise sector distinguishes China from other countries…

Doris Kwok 2008

Investment and Saving in China

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2/ Over one-half of enterprise investment is financed by enterprise retained earnings…
…its own saving !

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Investment and Saving in China

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3/ Enterprise saving from retained earnings constitutes a significant source of saving in China…

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Investment and Saving in China

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High enterprise saving driven by
4.

5. 6.

Increasing profitability caused by restructuring of SOEs Low dividend policy Capital intensive industry

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Why these questions are important?
investment and saving are high in historical context and compared to other countries  High investment and saving are key features of China’s pattern of growth  Find out the policy implications
 China’s

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Investment and Saving in China

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Risk & Policy Implications
Exposure of banking system to investment boom  Re-channeling of profit to investment may lead to overinvest or over-expand  Develop dividend policy  Improve allocation of capital  Strengthen corporate governance  Improve quality of growth  Increase role of consumption in the economy  Spending on health and education  Promotion of other industries

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Thank you for your attention

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Investment and Saving in China

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High enterprise saving driven by





Increasing profitability caused by restructuring of SOEs Low dividend policy Capital intensive industry

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Investment and Saving in China

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Increasingly important

Enterprise

Remarkably high

Savings
Government households

Substantially higher

Doris Kwok 2008

Investment and Saving in China

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