Opinion / Op-Ed Contributors

Initiative to explore the way to common prosperity

By Zhang Weiwei,Gu Xueming and Fan Gang (China Daily) Updated: 2016-10-12 08:16

A mutually beneficial way to use China's savings

China's national savings rate had been running high, in some senses very high, over the past 10 years, and it remains high now at a ratio of around 47 percent to the country's GDP.

What should a country do when it has such a high savings rate? It should invest more, of course. As China has done, investing in domestic industries and public infrastructure.

However, this investment caused the economy to overheat when consumption did not increase proportionally, and created a great deal of excess production capacity in certain industries.

And the savings rate has not fallen much, so the question remains, what should China do with its national savings?

There are three ways China can utilize its savings.

The first is the investment by private companies abroad. With fewer attractive investment projects in the domestic market, companies naturally look elsewhere for promising investment projects.

The second way is to lend the money to others. But this is the least efficient way to use its savings as it brings the lowest returns.

The third and best way to use the country's national savings is to invest in some public projects in foreign countries that will bring benefits to all.

There is no doubt that many countries along the Belt and Road need funds for infrastructure. The question here is whether those projects in other countries are in China's interests? The answer is: probably yes. China's exports have declined due to the global economic stagnation, including the slowing growth of emerging markets. If China contributes to boosting the economic growth of other countries and thereby people's incomes, China's export market can be expanded. Other countries have done this in the past. Now it is China's turn.

Fan Gang is president of the China Development Institute.

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