Bronte Capital: The Macroeconomics of Chinese kleptocracy

The other key fuel for kleptocracy is a copious supply of domestic savings to loot. The reason Chinese savings levels are so high is the one-child policy.In most developing countries the way that people save is they have multiple children hopefully to generate a gaggle of grandchildren all of whom are trained to respect their elders. Given most people did not live to old age if you did you became a treasured and well cared for family member.This does not work in China. Longevity in China is increasing rapidly and the one-child policy results in a grandchild potentially having four grandparents to look after. The “four grandparent policy” means the elderly cannot expect to be looked after in old age. Four grandparents, one grand-kid makes abandoning the old-folk looks easy and near certain.Nor can the elderly rely on a welfare state to look after them. There is no welfare state.So the Chinese save. Unless they save they will starve in old age. This has driven savings levels sometimes north of fifty percent of GDP. Asian savings rates have been high through all the key industrializations Japan, Korea, Singapore etc. However Chinese savings rates are over double other Asian savings rates – this is the highest savings rate in history and the main cause is the one-child policy.

via Bronte Capital: The Macroeconomics of Chinese kleptocracy.

HT: Brian Go

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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