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Why China Saves So Much Money

Written by: Paul Kedrosky

Article Overview: Great post by John Hempton on the real roots of China's penchant for savings: Its one-child policy.

Why China Saves So Much Money

Great post by John Hempton on the real roots of China's penchant for savings: Its one-child policy.

In most poor jurisdictions there is a simple method of saving for old age. Have six kids. They will have a few each and if you survive there will be lots of grandkids trained to respect their elders who will look after you.

This does not work in China. Indeed if everyone has only one child there will potentially be four grandparents per grandchild. You can’t expect to get supported.

In most developed countries people trust the system to look after them. Mutual funds are well developed, there is often a social security savings net, and a lot of people (perhaps falsely) expect to sell their house and live in clover.

But in China you can’t trust that either. So you save. And save. And save…

Chinese families save because they have a gun at their head. They save an amount that is almost incomprehensible by Western standards.

Read the whole thing.

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Article Tags: cant trust, chinese families, clover, developed countries, elders, grandkids, grandparents, hempton, jurisdictions, mutual funds, penchant, roots, social security, work in china



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