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The Growth of China’s Personal Saving Rate Dropped to 7 Percent

The Central Bank has published recent statistics which show that the rate of personal savings of Chinese residents has dropped. Xinhua reported that in August of 2018, the deposit balance in financial institutions in China increased by 8.3 percent compared to the same period last year. In the past 39 years, the growth rate of the deposit balance of financial institutions has never fallen below 9 percent. Meanwhile the growth of the personal saving rate dropped from 18 percent in 2008 to 7 percent in 2018. According to the article, the reason for the drop in the saving rate was attributable to increases in consumption, to a diversion from savings to wealth investment products and to home purchases.

According to the latest statistics from the National Bureau of Statistics, in the first half of the year, the per capita disposable income was 14,063 yuan (US$2,047), a year over year increase of 6.6 percent, continuing its steady growth since the first quarter, but it is still less than 9.4 percent of the year over year growth in the consumption rate.

Since the beginning of this year, even though the interest rate of wealth investment products has fallen below 5 percent, people still chose to invest because it is nonetheless higher than the rate the bank offers. According to WIND, which provides the statistics for financial data analysis services, at the end of 2017, the size of the money fund assets was 7.1 trillion yuan (US1.03 trillion). Since the beginning of this year, the size of the money fund has been rising, reaching 8.4 trillion yuan in August (US$1.22 trillion).

Buying a home has become another important channel for the placement of resident’s saving. According to the semi-annual reports that a number of banks released this year, the scale of real estate loans from banks is still high. Among 26 listed banks, 19 banks have real estate industry loan balances higher than the same period last year; only 7 bank loan balances have declined. It is dominated by small and medium-sized banks, especially in the third and fourth-tier cities. Down payments and monthly payments quickly consume household savings.

The August financial statistics that the Central Bank released showed that, in August, RMB loans increased by 1.28 trillion yuan (US$186 billion). In terms of sectors, the household sector loans increased by 701.2 billion yuan (US$102 billion), of which short-term loans increased by 259.8 billion yuan (US$37.8 billion) and medium- and long-term loans increased by 4415 million yuan (US$642 million).

The financial expert warned that the risk of decline in the personal savings rate could increase the pressure on the whole society for debt repayment and make it more difficult for the financial system to bear the risk.

Source: Xinhua, October 1, 2018