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China's savings too high - bank adviser

THE financial crisis has alerted China to the need to improve its economic structure by trimming savings and boosting consumption, a central bank adviser said in Shanghai yesterday.

"We can't sustain our growth with the current model of overly high savings and overly low consumption," Fan Gang, who sits on the People's Bank of China's monetary policy advisory committee, said at the Hexun Foreign Banks Forum in the city.

China's total savings accounted for about 50 percent of the economy, which is too high, he said. The savings ratio is expected to decrease in years as the central government is taking measures to reform the fiscal system and the social welfare system to help trim savings.

Fan said a 40-percent savings-to-economy ratio is healthy and balanced.

"The balance between consumption and savings is a key issue for China's economic development in the long run," he said.

The United States model showed that too low a savings ratio can cause headaches but China's overly high savings are also a problem for the country's long-term economic development, he said.

China's financial industry has weathered the crisis so far but the slump in trade and the contraction of overseas investment showed the importance of cutting reliance on external demand and boosting domestic consumption.


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