PBOC governor: No quick cuts in savings rates in China

Special Report:Global Financial Crisis

By Xin Zhiming

BEIJING, Feb. 11 -- China will not be able to reduce

its savings rate quickly because it is a result of a number of complex factors,

the country's central bank governor Zhou Xiaochuan said Tuesday.

"A number of complex factors account for the high

savings rate of East Asian economies, including China, and changes in the

exchange rate policy would not necessarily reduce it," Zhou said at a forum in

Kuala Lumpur.

"The exchange rate has something to do with the

savings rate, but statistically speaking, their relationship is vague. We cannot

adjust the savings rate simply by changing the exchange rate," he said.

Some politicians and commentators in the West have

said the "super-abundant savings from fast-growing emerging nations" sowed the

seeds for the US and global credit bubbles and are also responsible for the

global economic imbalance. They had suggested that the yuan be allowed to

appreciate faster to cut China's foreign exchange reserves.

"People may think the exchange rate and interest rate

are deciding the relationship between savings and consumption, but in reality

things are much more complicated," Zhou said.

Factors like special traditions, cultural

differences, family structure and demographic features of East Asian economies

explain the high savings rate of those countries, he said. People in East Asia,

for example, tend to save more due to the tradition of thrift even if their

income increases.

Many East Asian countries have a savings rate of

about 40 percent against their GDP while that in the US and UK is less than 20

percent.

The history of the countries that suffered from the

1997 Asian financial crisis has also prompted them to pile up foreign exchange

reserves as a tool to prevent reoccurrence of the financial crises, Zhou said.

"Failure of some countries to adopt necessary

regulation on speculative capital and adjust relevant regulatory framework and

failure of relevant international organizations to take the responsibility of

regulating irregular capital flows have forced the East Asian countries to

accumulate large amounts of foreign exchange reserves to protect their economy."

China has made relentless efforts to cut its savings

rate, but it will not work in the short term because it is the result of

deep-rooted social and cultural factors, he added.

Zhou also called for reforming the international

currency regime in the long term, making it more diversified and less dependent

on the US dollar.

(Source: China Daily)