What Are These Two Series?
The blue line is US gross private saving in billions of current USD. The red line is Chinese gross national saving in billions of USD.
I thought this was an interesting picture insofar as there is a common presumption that there was during the mid-2000’s a massive pool of saving in China, compared to that in the US. And I think a common view that Chinese saving continued to dwarf US saving. But in fact, during the period in which the “saving glut” hypothesis was being pushed, Chinese gross national saving was substantially smaller than US gross private saving. It would be nice to compare private to private, but I didn’t have access to that data. Using Eswar Prasad’s estimates, I estimated the values for 2000 and 2008, and present them below.
Figure 2: US gross private saving (blue) and PRC gross national saving (red) and gross private saving (maroon box). Sources: BEA, World Bank WDI, and author’s calculations.
So for me, the “Blame it on Beijing” meme still needs some more substantiation. I don’t doubt that some of the increase in the US current account deficit in ’03-07 was due to developments in China; but there were those little matters of yawning structural and actual budget deficits, expansionary monetary policy, and financial regulatory disarmament.
On the other hand, in effecting global rebalancing, it it clear that what happens in China is important — perhaps nearly as important as what happens in the US.
In terms of what’s happening in the US, it’s of interest to consider consumption and personal saving rates are evolving.
Figure 3: Log of real consumption of services and nondurables in Ch.2005$ (blue line, left axis); and personal saving rate (red line, right axis, in percentage points). Source: BEA, GDP 2nd release.
Log real nondurables and services consumption, which under the stochastic version of the permanent income hypothesis should react most strongly to expectations regarding the path of wealth, has flattened out. The personal (not private) saving rate has risen substantially. How easily rebalancing is effected will depend importantly upon these trends (see also  ).