Back in 2005, when Ben Bernanke first warned of the risk of a global savings glut, the combined savings rate of Asia’s main “surplus” economies (China, Japan, South Korea, Taiwan, Hong Kong, and Singapore) equaled 35 percent or so of their collective GDP.
That number now? About 40 percent.
That is obviously a lot of savings—savings which either has to finance a very high level of investment at home or has to be exported to the rest of the world. And with low interest rates around the world, the world doesn’t especially need to import savings from Asia right now.
East Asia’s high level of savings is the subject, obviously, of my new CFR working paper.
Much is often made of the small fall in China’s national savings rate. China’s savings rate peaked at a bit over 50 percent of GDP; in 2015 it dipped to 48 percent. A fall, yes, but not a big one. Remember that the flip side of high savings is a low level of consumption; without high levels of investment, domestic demand growth can easily fall short.
In the aggregate data for Asia’s surplus countries, the rise in China’s share of the region’s output more than offsets the (modest) fall in China’s savings rate. The national savings rate in Korea and Taiwan has also increased over the last five years. Hence record regional savings.
In dollar terms, the jump in savings is even more spectacular. Asian surplus economies saved around $2.8 trillion back in 2005. Now they save around $7 trillion. China’s savings have increased from $1 trillion to more than $5 trillion.