Confucianism, Social Norms and Saving Rates in China

This paper studies the link between the perception of raising child and saving rates of Chinese households. The high saving rate in China has recently received much attention. This paper proposes a possible explanation for the high saving rate among middle aged households in China – their old age support motive. Using a unique data set collected by survey teams in 11 provinces in China, we argue that the two possible drivers for the high saving rates are the lack of financial development and the declining reliability on children as old age support/insurance. An old age support perception index is created using our survey data. Using two stage regression analyses, we find divergent saving patterns between households with sons and daughters. Households with son(s) save significantly less than those with daughters. The saving rate further decreases if the parents have a strong expectation of receiving old age support from their grownup sons in the future. Using data on inter-generational transfers from the same survey, we further demonstrate that parents in regions with high perception index do receive more cash transfers from their grownup sons. Interesting, for families with daughters, the effect is negative.