saving and investment by jia wei yacheng tang peixin liu
TRANSCRIPT
![Page 1: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/1.jpg)
Saving and Investment
By Jia Wei Yacheng Tang
Peixin Liu
![Page 2: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/2.jpg)
The saving situation The investment situation The relationship between saving an
d investment
![Page 3: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/3.jpg)
Saving
Macroeconomic concept:
Y=C+I+G+NX
In IS-LM model,I=S
savingGovernment saving
Enterprise saving
Household saving
![Page 4: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/4.jpg)
Rapid development of economy
The blue bar means amount of GDP The red line means the growth rate of GDP
![Page 5: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/5.jpg)
• The red bar means the amount of household saving ( in yuan)
• The blue line means the saving rate• Up to 2004, resident saving in china has reached 14705.4
billion keeping 16.4% growth rate.
01000000000000
20000000000003000000000000
40000000000005000000000000
60000000000007000000000000
8000000000000
0.005.0010.0015.0020.0025.0030.0035.0040.0045.00
![Page 6: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/6.jpg)
Why does resident saving in china increase so quickly?
![Page 7: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/7.jpg)
The reason(1)
Undoubtedly, rapidly increas of households’ income is the precondition of high saving rate.
![Page 8: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/8.jpg)
Per Capita Annual Income and Engle Coefficient of Urban and Rural Households
Per Capita Annual Net Per Capita Annual
Disposable
Income of Rural HouseholdsIncome of Urban
HouseholdsEngle Coefficient of Engle Coefficient of
Year Rural Households Urban Households
Value (yuan) Index Value (yuan) Index (%) (%)
1991 708.6 317.4 1700.6 212.4 57.6 53.8
1992 784.0 336.2 2026.6 232.9 57.6 53.0
1993 921.6 346.9 2577.4 255.1 58.1 50.3
1994 1221.0 364.4 3496.2 276.8 58.9 50.0
1995 1577.7 383.7 4283.0 290.3 58.6 50.1
1996 1926.1 418.2 4838.9 301.6 56.3 48.8
1997 2090.1 437.4 5160.3 311.9 55.1 46.6
1998 2162.0 456.2 5425.1 329.9 53.4 44.7
1999 2210.3 473.5 5854.0 360.6 52.6 42.1
2000 2253.4 483.5 6280.0 383.7 49.1 39.4
2001 2366.4 503.8 6859.6 416.3 47.7 38.2
2002 2475.6 528.0 7702.8 472.1 46.2 37.7
2003 2622.2 550.7 8472.2 514.6 45.6 37.1
2004 2936.4 588.1 9421.6 554.2 47.2 37.7
![Page 9: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/9.jpg)
Reason(2) Traditional Ideology and Saving Culture
Affected by culture and custom Confucianism ( 儒家思想 ) China is a county with high frequent
wars and natural disasters in history
![Page 10: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/10.jpg)
The reason(3) Uncertainty towards the future during
the economic reform makes people save more
1. the reform of SOE, state owned enterprises.2. the social welfare system reform 3. education industrialization
![Page 11: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/11.jpg)
Reason(4)
Huge amount of saving is kept at the banking system because lacks of investment opportunity.
![Page 12: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/12.jpg)
INVESTMENT INVESTMENT REVIEW INVESTMENT COMPOSITIONS INVESTMENT STRUCTURE INCREAMENTAL CAPITAL-OUTPUT RATIO
![Page 13: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/13.jpg)
HISTORICAL INVESTMENTINVESTMENT
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Yea
r
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
YEAR
% O
F G
DP
![Page 14: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/14.jpg)
INVESTMENT COMPOSITONSAVING INVESTMENT
![Page 15: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/15.jpg)
INVESTMENT COMPOSITONForeign Direct Investment (FDI)
Source: The Chinese Economy, 2006.
![Page 16: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/16.jpg)
INVESTMENT STRUCTURE
Most Chinese domestic investment is fixed investment including machinery, residential building, etc…
And these investments are very high.
![Page 17: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/17.jpg)
SOURCE OF FDI
Source: The Chinese Economy, 2006
![Page 18: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/18.jpg)
The unique relationship in Chinese economy
The reason --- SOE
The result
Our suggestion
Relationship between saving and investment
![Page 19: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/19.jpg)
Many scholars already analyze the relationship between saving and investment, such as Feldstein and Horioka ( 1980 ) ,Sinha (2000) and A.Corbin ( 2001 ) .
But we can not apply their theory and models in our analysis because of the unique situation in China.
![Page 20: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/20.jpg)
The reason
In Canada Bank of Canada monetary policy
Companies make the investment decisions by themselves
In China People’s Bank monetary policy
Companies
State Owned Enterprises major player
controlled by the government
Private company make their own decisions
Only small percentages
![Page 21: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/21.jpg)
What is SOE?
General situations: build from planning economy period
Dominated the whole economy
Characters : huge companies, in heavy industries
& losing profit
Company structure: workers and managers
surplus workers and officials
![Page 22: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/22.jpg)
Debt of SOE
0.00
10000.00
20000.00
30000.00
40000.00
50000.00
60000.00
70000.00
1998 1999 2000 2001 2002 2003 2004
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Unit:100 million Yuan
![Page 23: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/23.jpg)
The total asset of SOE and the share of SOE in all enterprises
0.00
50000.00
100000.00
150000.00
200000.00
250000.00
1998 1999 2000 2001 2002 2003 2004
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Unit:100 million Yuan
In 2004, the total investment in fixed asset is 70477 billion and SOE takes 49.7%
![Page 24: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/24.jpg)
The company structure
workers
Managers
Surplus workers
Officials
![Page 25: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/25.jpg)
Why does SOE get the investment every year ?
When the SOE lost profit, the official in SOE borrow money from SOB. (from their political power and “guanxi”)
In the second year, the SOE ask for a bigger loan from another SOB to cover the old loans and new loss.
Third year, another bigger loan to cover the old one and new loss.
![Page 26: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/26.jpg)
The circle of capital
SOE SOB SAVING
When the money from saving into SOB, most of them become the capital for SOE and then disappear.
NPL
![Page 27: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/27.jpg)
Bank nonperforming loans to total in %
0
5
10
15
20
25
30
35
2000 2001 2002 2003 2004
PR Chi naHong KongJ apanKorea
![Page 28: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/28.jpg)
What is the result?
A higher ICOR
The overheat economy
The financial crisis
![Page 29: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/29.jpg)
The first generation effect
05
1015202530354045
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
J apankorea
![Page 30: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/30.jpg)
If the first generation effect happens 15 yrs later
SOE SOB SAVING
Bankrupt (huge NPL)
Financial crisis
![Page 31: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/31.jpg)
Our suggestion
In short run, the central bank should pay more attention to the overheated economy and control it efficiently. The government should enhance the productivity in SOE and reform SOE.
In the long run, the government should reform the financial system, including the huge nonperformance loans and the ownership problems of SOB, ASAP.
![Page 32: Saving and Investment By Jia Wei Yacheng Tang Peixin Liu](https://reader035.vdocument.in/reader035/viewer/2022062417/551c500d550346a66a8b4b82/html5/thumbnails/32.jpg)