10/29/2015

The Trouble With Saving 21 Trillion Yuan

Economist Liang Hong argues that Chinese authorities are missing a trick in their efforts to fix what ails the nation’s economy. The central bank is cutting interest rates to ease China’s heavy debt burden, but the fiscal authorities are working in the opposite direction. They’re sucking more money out of the economy through taxes, fees, and other measures than the government is giving back, Liang says. Public institutions have so much money that they’re socking away huge sums in bank deposits, “a peculiar phenomenon existing only in China,” she wrote in an August report.
“The government is oversaving,” Liang said in a September interview in her office at the Beijing headquarters of China International Capital (CICC), an investment bank where she serves as chief economist. As a result, she says, “the economy is not running efficiently.”  Read more

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