Saving rate statistics are misleading, or why China is not really saving more than the US

Let's say you own a bond you are not allowed to sell that pays you £100 a month. Even though you can't sell the bond, it is silly to say that you have zero savings; your savings are given by the value of the bond even though you can't just sell it now and collect the money. A guy that has a bond with the same characteristics which pays £1 a month has much, much lower savings than you do, even though none of you has any money in the bank right now.

Now we got this out of the way, think of these two scenarios:

Scenario 1: You have £50,000 in the bank and use them to pay for a university education that will help you make much more in the future. Your measured savings have gone down by £50,000; your effective savings - your wealth - has gone up. Saving rate statistics will look at the fact your bank balance is down but will ignore the fact you will be earning much more in the years to come.

Scenario 2: There are two men, same age, each with zero money in the bank and no assets to their names. One has a university education, earns £30,000 a year and has experience managing a company. The other has only finished primary school, earns £3,000 a year and has experience assembling parts in a factory. Who has more savings?

Now let's say that the latter man starts saving 20% of his salary and lends the money to the first guy. Who has more savings (wealth) now? If the second guy uses the money to get an MBA that will bring him even more money in the future, has his saving rate gone up or down? How meaningful is it to say that the first guy saves 30% of his income and the second guy -3%?

And does this story change if the first guy is Chinese and the second guy American?


  1. Thomas Says:

    Not sure if I can derive the conclusion from your post. I disagree with the 2nd part of the title and I am not sure if the 1st part of the title is related. In essence, Americans save less than Chinese:


    1) Chinese do spent money on their education, incrementing their future earning power, provided that they can afford it. Most of their savings (on average 40%) go first towards making up for the lack of nationwide healthcare and pension system, then towards education.

    2) Most Americans require credit to buy their education. They have very few savings as most of their income is spent on consumption and paying of interest on loans, etc.


    1) China should work towards a nation-wide health care and pension system, such that Chinese can spend a larger portion of their savings for education and consumption.

    2) America should increase their savings rate and reduce excessive borrowing as this was the fundamental reason for the global crisis.