Addressing The Savings Imbalance

While we are pencilling in gradual appreciation of the Chinese yuan over the coming years, there is a growing risk that the authorities could choose to keep the exchange rate fixed, which would see rising domestic consumer price inflation help to reduce China's high savings rate. However, with China's savings rate having risen in recent years despite an appreciating real effective exchange rate, structural shifts in policy may be required to reduce the current imbalances.

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