A key plank of China’s latest monetary stimulus was the scrapping of remaining interest rate caps on short-term deposits.
The liberalization of the interest rate regime should support China’s ambitions to get the yuan added to theInternational Monetary Fund’s pool of international reserve currencies. But the move also has implications for how China’s transformation away from an export and investment led economy to a consumption-led economy plays out.
Chinese households tend to save more cash than their spendthrift peers in the Western world, so potentially earning higher interest rates on their deposits should boost incomes and spending.
But how high is China’s gross savings rate? The World Bank defines it as gross national income less total consumption, plus net transfers so a broader gauge than just individuals by including both companies and the government.
Pretty high, according to data from the World Bank from 2013, the latest period for which data are available. Only Kuwait and Bermuda had higher rates as of 2013.