China’s monumental savings rate is a popular topic of for policy
discussion.1 It has been blamed for the global financial crisis,
currency wars (Portes 2010), and the ensuing Great Recession
(Mees 2012). But what explains the high savings rate? The
growing body of work on this question has put forward many
answers, ranging from the one-child policy to the role of
marriage and the weak welfare state (see for example Horioka and
Wan 2007, Wei and Zhang 2009, Chamon and Prasad 2010, Jin et al.
2010 and Ma and Yi 2010). In recent research (Mees and Ahmed
2012), we use a dataset that is more recent and covers a longer
time span (1960-2009), including the periods with the most
important economic reforms, to find the determinants of the
household savings rate in China. To that extent we combine
Modigliani and Cao’s data with our data, and subsequently use a
dummy to account for a level shift in the data for the
regressions (see Figure 1). For the analysis, we make use of an
error-correction model. Within this specif