Case Study Of Changes In Interest Rates On Household Savings In China

Household savings is one of critical source of investment funds in the process of a country’s economic cycle. Savings either is for investment directly, which can also affect the consumption results in the aggregate demand, and thereby contribute to stimulating economic growth. Interest rate policy is an important part of monetary policy, and is also one principal implementation way of monetary policy. Changes in interest rates will directly affect the benefit of depositors, which lead to increase or reduce savings depositors, and then change the ratio of savings and consumption. Since the nineties of20th century, there has been a tremendous reform via Chinese government in the political, economic, social fields that significantly increased the market extent, and gradually improved the external environment of interest rates to play a regulatory role. At this point, using empirical study way to search the relationship between changes in interest rate and household savings has a further realistic meaning for the conduction mechanism of Chinese interests and macro-control measures and so on.This paper is based on the previous studies and the reviews on the theory of the relationship between interest rate and saving, uses the method of qualitative analysis and quantitative empirical test, to analyze the six main factors that influence Chinese household savings, which are disposable income, nominal interest rates, inflation, stock market, social security and the real estate market, then analyze and research other problems, such as the relationship between six main factors and household savings. This paper pays much attention on the changes interest influence on household savings. The conclusions are as follows:The nominal interstate has positive relationship with the increase of household saving. During1993to2009, nominal interest rates raise1percentage point that the growth rate of household savings deposits increased by2.41percentage points. And there is a positive relationship among the growth rate of per capita disposable income, per capita growth rate of per capita social security expenditure and growth rate of household savings deposits and a negative relationship among inflation rate, changes rate of Shanghai and Shenzhen stock market capitalization and growth rate of household savings deposits. Commercial real estate development enterprise sales growth rate have little effect on growth rate of household savings deposits.In the interpretation of empirical results, we find that significantly increase degree of the market and the rapid development of securities markets and other factors prompted the current interest rates of change in China’s household savings in the transmission mechanism of gradual smooth. In the further analysis, it shows that economic growth, liquidity inhibition, precautionary savings and the widening gap between rich and poor caused by the gift of savings is the main reason for rapid growth of the savings deposits of resident. Finally, according to the Chinese particular economic environment, the author provides suggestions for five areas: deepening interest rate reform, adjusting income distribution structure, regulating the securities market, improving the social security and consumer credit mechanisms. The suggestions are good for promoting the role of interest rates as a conductive channels to household savings much smoothly and ensuring a more effective interest rate on China’s economy to play a regulatory role.