Dummy, It Is All About SEX !

The household savings rate in China went from about 16% of disposable income in 1990 to over 30% today. The comparable rate in the U.S. was about 3% before the crisis, and 6% in recent months.

The economic consequences are global as the excess savings directly impacts China's balance of trade and current account surplus. Many economists have asked the question - Why do the Chinese save so much?

Some attribute it to a lack of a social safety net on health care, pensions, etc. as well as anxiety over future inflation. Others have cited the high level of savings comes from Chinese corporations rather than households.

While they all could be contributory factors; a recent paper by economists Shan-Jin Wei of Columbia University and Xiaobo Zhangk of the International Food Policy offers a different explanation - SEX.

The two economists suggest that sex selection in China has led to intense competition for brides. Savings rates have shot up as families strive to boost their sons' odds of marriage. (See graph)

Their study hypothesized that the strict 30-plus-year old one-child-per-family plan is the primary driver of the high savings rate. This, coupled with a cultural preference for male offspring, has led to a significant imbalance between the number of male and female children born to its citizens.

Statistically speaking, this translates into about one in five Chinese men out of the marriage market when the current generation of children grows up. The resulting pressure might incentivize men and parents with sons to increase savings in order to have a competitive edge in the marriage market.

Even those not competing in the marriage market must compete to buy housing and make other significant purchases, pushing up the savings rate for all households.