Population Aging and Saving in China : The Role of Financial Development

The question as to whether population ageing affects saving remains controversial. The paper argues that the inconclusiveness may be because the population ageing-saving nexus is conditioned by financial development. Using China’s provincial data over the period 1989-2019, it indeed finds that the saving consequence of population ageing hinges on financial development and that banking and stock market development play a different role in the nexus. Specifically, population ageing raises household saving, the effect that dampens with banking development but strengthens with stock market development. The opposite holds for total saving. Population ageing reduces total saving, the effect that moderates with banking development but intensifies with stock market development. These effects hold for regions with moderate saving rates. For regions with the least and highest saving rates, population ageing decreases household saving but raises total saving, both of which weaken with banking development but reinforce with stock market development