By Jia Shen, Research Department of Development Strategy and Regional Economy, DRC

Research Report, No.140, 2020 (Total 5884) 2020-6-11

Abstract: The rapid accumulation of physical capital supported by high savings rate has provided key guarantee for China’s rapid economic growth since the reform and opening up started in the late 1970s. Affected by factors including changes in demand structure and aging population, China’s savings rate has continued to decline since 2010, leading to slowdown in its capital and economic growth. At present, the level of China’s physical capital per worker is still only one-third of that of the United States. After the realization of building a moderately prosperous society in all respects, China still needs to maintain appropriate economic and physical capital growth. Under the influences of factors such as the increase of aging population and the continued expansion of domestic consumption, the decline of savings rate is an inevitable trend. To further drive capital deepening, China needs not only to adjust birth control and retirement policies in a timely manner but also address the problems including long-term sluggish development of China’s human capital against faster physical capital accumulation, low proportions of knowledge-intensive and human capital-intensive industries and low industrial concentration to improve the efficiency of capital utilization and circulation.

Keywords: savings rate, capital deepening, capital-output ratio, investment structure