We characterize the patterns and determinants of saving behavior among Chinese households
using a subset of the Urban Household Surveys from 1990-2005. The household saving rate
(relative to disposable income) has increased gradually over this period although the share of
household savings in national savings has stagnated. Estimates of the age profile of savings
show that young households tend to have relatively high saving rates, possibly in order to
build a buffer stock of savings and to self-finance purchases of major durables. Saving rates
then decline with the age of the household head until around age 45, when they begin to
bounce back sharply; saving rates remain at high levels for older workers. Cohort analysis
indicates that older working-age cohorts, who are likely to be most affected by marketoriented
reforms, tend to have the highest saving rates. We argue that these results are
consistent with two phenomena—one is the increased uncertainty related to state enterprise
restructuring (and associated uncertainties related to benefits provided by these enterprises)
and the other is the rising private burden of expenditures on education and health care. In
particular, uncertainties related to health care expenditures, which tend to be lumpy, may be
an important reason for the high saving rates of households with older heads.
Finally, we combine our estimated age profile of household savings with disaggregated
demographic projections to argue that, despite the overall graying of the population,
demographic shifts may keep household saving rates high over the next decade or two.