Working Paper

Can rising housing prices explain China’s high household saving rate?

Abstract: China?s average household saving rate is one of the highest in the world. One popular view attributes the high saving rate to fast rising housing prices and other costs of living in China. This article uses simple economic logic to show that rising housing prices and living costs per se cannot explain China?s high household saving rate. Although borrowing constraints and demographic changes can help translate housing prices to the aggregate saving rate, quantitative simulations using Chinese data on household income, housing prices, and demographics indicate that rising mortgage costs contribute at most 5 percentage points to the Chinese aggregate household saving rate, given the down-payment structure of China?s mortgage markets.

Keywords: Economic conditions - China; Housing - Prices; Consumer behavior; China;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2010

Number: 2010-048