Share on Google Plus Share on Twitter Share on Facebook Share on LinkedIn Share on PInterest Share on Fark! Share on Reddit Share on StumbleUpon Tell A Friend

Printer Friendly Page Save As Favorite View Favorites (# of views)   1 comment
OpEdNews Op Eds

Sex Selection and Trade Surplus in China

By       Message Dian Chu     Permalink
      (Page 1 of 2 pages)
Related Topic(s): ; ; ; ; ; ; ; , Add Tags Add to My Group(s)

Well Said 1  
View Ratings | Rate It

opednews.com

Author 46191
- Advertisement -

By Dian L. Chu, Economic Forecasts & Opinions

Concerns over the global imbalance resulting from large Chinese current account surplus and large U.S. current account deficits has many economists and politicians locked in heated debates. Some experts, including Paul Krugman, propose measures focusing on changing China's exchange-rate policy and trade barriers.

- Advertisement -
Indeed, the household savings rate in China went from about 16% of disposable income in 1990 to over 30% today. The comparable rate in the U.S. was about 3% before the crisis, and 6% in recent months.

The economic consequences are global as the excess savings directly impacts China's balance of trade and current account surplus. Many economists have asked the question - Why do the Chinese save so much?

Some attribute it to a lack of a social safety net on health care, pensions, etc., as well as anxiety over future inflation. Others have cited the high level of savings comes from Chinese corporations rather than households.

While they all could be contributory factors; a recent paper by economists Shan-Jin Wei of Columbia University and Xiaobo Zhangk of the International Food Policy offers a different explanation - social policy.

- Advertisement -
The two economists suggest that sex selection in China has led to intense competition for brides. Savings rates have shot up as families strive to boost their sons' odds of marriage. (Click to enlarge graph)

Their study hypothesized that the strict 30-plus-year old one-child-per-family plan is the primary driver of the high savings rate. This, coupled with a cultural preference for male offspring, has led to a significant imbalance between the number of male and female children born to its citizens.

Statistically speaking, this translates into about one in five Chinese men out of the marriage market when the current generation of children grows up. The resulting pressure might incentivize men and parents with sons to increase savings in order to have a competitive edge in the marriage market.

The paper estimates that about half of the increase in the savings rate over the last 25 years can be attributed to the rise in the sex ratio imbalance. The authors further argue that:

"None of the discussions [on global imbalance] have brought family planning policies or women's rights to the table .... Our research, however, suggests that this is a serious omission."

- Advertisement -

The authors also point out that even those not competing in the marriage market must compete to buy housing and make other significant purchases, pushing up the savings rate for all households.

This conclusion actually brings up part of the point I've raised in previous articles. That is, China needs time to push through difficult economic and social reforms to increase investment and consumption, while reducing savings rate at home, before it can allow its currency to float freely against the dollar.

These reforms could take up to 10 years to implement. And only when the productivity of China reaches that of the United States will the two countries' price structures converge.

Resolving these global imbalances requires all major surplus and deficit countries to work through a complex adjustment process. One can only implement a proper policy through rational discussion over an understanding of the diagnosis.

Next Page  1  |  2

 

- Advertisement -

Well Said 1  
View Ratings | Rate It

http://dianchu.blogspot.com
Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to several leading investment websites. Ms. Chu's work is also syndicated to media outlets worldwide. She blogs at Economic (more...)
 

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon



Go To Commenting
/* The Petition Site */
The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Chinese Yuan v The U.S. Dollar: In The Case of Global Reserve Currency

Plausible: Sovereign Default On A Global Scale

Crude Oil Breaks The Dollar Rule For The Summer High Noon

Sex Selection and Trade Surplus in China

Behind the Sentiment Disparity: Main Street vs. Wall Street

Sovereign Risk and the Price of Oil