With the global economic downturn taking its toll on China's households and businesses, Chinese economists have moved to defend the nation's savings rate against charges that it has aggravated the crisis.
The Financial Times on Jan 2 reported US Treasury Secretary Hank Paulson as saying, "In the years leading up to the crisis, super-abundant savings from fast-growing emerging nations such as China and oil exporters ... put downward pressure on yields and risk spread everywhere."
Paulson said this laid the seeds of a global credit bubble, the British newspaper reported.
His argument was largely endorsed by Federal Reserve chairman Ben Bernanke, according to the Financial Times.
However, Zhang Yuyan, an international economics expert from the Chinese Academy of Social Sciences (CASS), said a major cause of the crisis was the unchecked business operations of US financials in which the banks repackaged mortgages, including sub-prime, into investment products and sell to financial institutions worldwide.
He also said it was illogical to blame China's high savings rate and purchase of US treasuries for low US interest rates kept by the Federal Reserve under former chairman Alan Greenspan.
The Federal Reserve kept interest rates at historically low levels for three years before 2004, with the lowest rate at 1 percent in June 2003, which economists said helped drive the US economy at that time but also created a huge housing bubble.
"China has had high savings rates for the last 30 years, not only in recent years. Moreover, the US interest rate is controlled by the Federal Reserve, not anyone else," he said.
Tan Yaling, a Beijing-based financial expert, echoed Zhang's view.
"It is really selfish to blame China and other developing countries for the global financial crisis since the world economic order has been dominated by developed countries," she said.
Developing countries with supply economies had little say over world economic affairs, she said.
People's Bank of China (PBOC) governor Zhou Xiaochuan said last month at the fifth China-US strategic economic dialogue that US overspending and heavy reliance on debt were key reasons for the crisis. He urged the US to increase savings and reduce budget and trade deficits.
Saving for good
Economists estimated China's savings rates (the percentage of savings in a person's disposable income) remained between 30 percent and 40 percent over the years.
PBOC vice governor Yi Gang said on Dec 26 Chinese individual bank savings had exceeded 20 trillion yuan ($2.92 trillion) while loans, including those for cars and housing, added up to just 3.7 trillion yuan by the end of September 2008.
"This indicates the debt level of Chinese households is quite low and such balance sheets are very healthy compared with those for US and European households, making it possible to create room for development," he said.