Former PBOC boss blames big savers for market glut

June Chen

China's savings are at a very high level in the world, and when a country's savings rate is relatively high, it is prone to overcapacity, China's former central bank governor Zhou Xiaochuan said yesterday.

Speaking at the 2025 Caijing annual conference in Beijing, he explained if there is not enough supply to meet demand in a country with a low savings rate, it would normally take time to source fresh funds to build new capacity and fill the void.

This slow process caused by limited savings will avoid too much investment being rushed in to bridge the shortfall, which in turn could lead to overcapacity.

In China, the opposite holds true, he said.

China generated 28 percent of total global savings in 2023, only a little less than the 33 percent share of the US and European Union combined, according to the International Monetary Fund.

Zhou also pointed out that boosting domestic demand was not contradictory to overseas investment.

Boosting domestic demand needs significant effort as well as a lot of research, Zhou said.

But even if domestic demand grows, it would be still hard to tap into the huge amount of savings in the mainland.

Therefore, it is likely that there would be a large amount of excess savings still remaining and that would be used for overseas investment.

"Therefore, it is important for us to study two-way opening up," Zhou said.

In Zhou's opinion, the main task about overseas investment at present is to improve investment quality and avoid blind asset allocation.

These improvements could include choosing proper investment destinations from economies in Belt and Road Initiative to diversify geopolitical risks.

And besides traditional high-technology industries, investors should also pay attention to emerging sectors with potential such as green energy and the energy transition, which will also benefit the utilization rate of equipment at home.

Additionally, foreign exchange reserves and large state-based financial institutions accounted for a relatively large proportion of investors in the past, but the amount of foreign investment by the private economy has increased very fast in the past 20 years.

Therefore, Beijing should also launch policies to help private investors to make better overseas investment decisions, he said.