To Save or Not to Save:
The Challenge Facing China

Mentor: Li Qi
Students: Kelley Bledsoe, Tiye Glover, Asalwe Edwige Tia, Qian Zhang

Project Abstract

This project addresses a particularly important issue for China as the country struggles to build an effective new social security system (in pension, health care, and social assistance) to accommodate the tremendous changes in economic and social institutions since the beginning of China’s dramatic economic reforms in 1978. It seeks to provide a complementary micro-level analysis, to the discoveries of household behavior reported by recent studies using macro-level data, by gathering evidence from individual households to understand their budget structure, motives, and factors of consideration for savings. The research of all four students focus on this economic transition and how economic institutions shape people’s behavior.

The student-faculty research team interviewed rural and urban households in and around Beijing, Xian and Shanghai, held discussions with students and faculty members at two universities in China, talked to individuals in the human resources department about workers’ benefits at Google China, and conversed with analysts about household savings behavior at the Ministry of Finance.

This research showed that years of income growth has not raised household consumption ratios. On the contrary, people are saving more and more. The research team therefore concludes that China’s economic and social transition to a market system is far from done. Although raising income is an obvious achievement, the lack of social security and health benefits throughout the country creates huge economic structural problems for the future and forces Chinese to save. Other factors promoting a high level of saving were discovered by the research team, including the long standing tradition of saving and the desire to save for a child’s future education. It was also noted that over the past several years the growth of personal income is much slower than that of the growth of national GDP indicating that most of the economic advance has not been channeled to the individual in China.

Kelley Bledsoe

Alongside fellow students and my economics professor, I explored the intricacies of Chinese life through studying savings patterns for family, food and other essentials, and health. The chief focus of my research has been on how gender affects a person’s attitude towards and preparation for retirement and other uncertainties. By interviewing individuals in both rural and urban households and collecting data through questionnaires, I discovered that women saved at a significantly higher rate than men. A chief motive behind their high level of saving is their uncertainty about their future.

Having completed my research experience, I have returned to Asia on a Fulbright scholarship to teach English in Taiwan reenergized and better equipped culturally and academically to do so.

Tiye Glover

The ASIANetwork Freeman Student-Faculty Fellows award allowed me to experience my first trip abroad to a country whose culture is furthest from my own. While in China, I sought to answer the question: “Can rural and urban savings rate disparities be attributed to health care and retirement pension policies?” I am now in the process of using the statistical program STATA to run regressions, and analyzing the data secured from household interviews in country as case studies to address this question. I also plan to carefully consider a range of theories that have been developed to explain the reason for rural and urban disparities in savings.

Asalwe Edwige Tia

This grant enabled me to do what I imagine myself doing a few years from now, meaning research in economics. I was able to appreciate the difference between doing research for an end of term paper and research as a field research experience. I am now aware that the most difficult part of writing a paper is not the analysis but the data collection. My research focuses upon the impact of governmental policies on Chinese household consumption and saving behavior. While in China I collected published statistical data and conducted a number of interviews with rural and urban Chinese citizens to further this analysis. My final paper will detail the impact of specific reforms on health care, the pension system, and demographics.

Qian Zhang

This field trip experience was completely different from my traditional research which is marked by sitting in front of a computer analyzing data. In China we visited three distinct cities, Shanghai, Xi’an and Beijing, and near Beijing interviewed rural citizens which is important to my research that focuses upon the different strategies adopted by rich and poor, urban and rural, Chinese to prepare for retirement and other uncertainties. My hypothesis is that poor and rural households rely more on children to supplement their income than urban dwellers who will turn to savings and private investment. Surprisingly, I discovered that many rural residents were forthcoming in saying that they would rely on social security rather than their children to sustain them in retirement, and a large number of them also expressed satisfaction with government efforts to establish rural health care systems.