In my quest to fill the void left by Tom Keene and Bloomberg on the Economy, I’ve been listening to a variety of other podcasts. The majority of them are bland, boring, and lack the wit and one-liners of Keene.
One good show (though hard to find on podcast) is the Hays Advantage, anchored by Bloomberg’s Kathleen Hays.
On her February 18th show, she interviewed Shang-Jin Wei, a researcher at Columbia University, who has looked at the savings rate in China.
On average the Chinese savings rate is quite high. Many economists point to the fact that China is an export nation, and blame government and businesses for not spending enough in the global economy. Wei, however, points to a more basic human desire as the reason for personal high savings: marriage and gender imbalance.
In his research (synopsis available here) he found that 30 years ago the gender difference was quite natural – about 105 boys born to every 100 girls. After China implemented the “one child policy” in about 1980, however, things began to change: the gender imbalance widened and savings shot up.
In China, boys are traditionally more valued than girls. Being limited to only one child, many parents will do what they can to ensure that their one child is a boy, whether that be the abortion of girls (technological improvements in ultrasound over the corresponding timeframe have helped this) or infanticide after birth.
After 30 years the results are startling. On average, there are currently 122 boys born for every 100 girls. Mathematically speaking, this means that about 1 in 5 men will be unable to marry in the future.
How does this affect savings?
Wei theorizes, and shows evidence, that parents are trying to make their sons more attractive to female prospects by giving them wealth – essentially building a dowry for them. To do this, parents forego spending on themselves, which drives savings up.
On the flip-side, it seems families with girls can spend on themselves, and those girls will have a lot of choice in the future.
His evidence is compelling. He compares the savings rate of not only parents with girls compared to parents with boys, but also the rates of similar families in different imbalance densities. (ie. a family with a son that lives in an area of 110 boys to 100 girls compared to a family with a son that lives in an area of 130 boys to 100 girls).
If this is the case, no amount of belly aching from governments will change Chinese savings.