Chinese households save about 25% of their income, contributing to one of the world’s
highest current account surpluses. The life cycle theory and precautionary savings motive
provide only an incomplete explanation. The paper proposes a new hypothesis: China’s
high and rising sex ratio imbalance—too many boys relative to girls at birth—due to a
combination of a strict family planning policy, parental preference for sons, and
inexpensive abortion technologies, may have induced the Chinese to postpone
consumption in favor of wealth accumulation. To avoid condemning their sons to lifelong
bachelorship, families with a boy raise their saving rates. Other families do not
reduce their savings rates due to a spillover channel. In panel fixed effects regressions
across provinces, local saving rates are found to be strongly positively associated with
local sex ratio imbalances, after accounting for demographics and social safety nets, and
after using an instrumental variable approach. This effect is stronger in rural areas than in
urban areas. Household level data also supports our hypothesis: those with a son tend to
save more in regions with a more skewed sex ratio, holding constant various household
features. Households with daughters do not reduce their savings in these regions. The
increase in sex ratios accounts for about half of the increase in household savings
nationally.