The savings crisis and China's future growth

Abstract

PurposeIt is very important to understand the current (2007‐2009) economic crisis because it is the most severe since the Second World War and is having a tremendous impact on global and national economic environments. Therefore, the purpose of this paper is to explain the main factors (savings attributes and cultural factors) that created the crisis and better understand which nations will gain in the post‐crisis era.Design/methodology/approachThe paper uses descriptive data to explore the global, Chinese and US economic environments prior to the economic crisis. In addition, the paper used an econometric model in order to evaluate the impact of cultural variables on savings behavior.FindingsThe data lead us to one main conclusion: the crisis was created by major changes in global saving rates during the last two decades.Originality/valueThe paper makes two major contributions: first it describes the opportunity that the current international crisis creates for China. The opportunity is an outcome of the high saving rates in China, as compared to the lower saving rates in the western countries. Second it points out the gap in the current academic literature regarding savings, primarily the lack of research on the relationship between savings and culture.