China will not be able to reduce its savings rate quickly because it is a result of a number of complex factors, the country's central bank governor Zhou Xiaochuan said on February 11.

"A number of complex factors account for the high savings rate of East Asian economies, including China, and changes in the exchange rate policy would not necessarily reduce it," Zhou said at a forum in Kuala Lumpur.

"The exchange rate has something to do with the savings rate, but statistically speaking, their relationship is vague. We cannot adjust the savings rate simply by changing the exchange rate," he said.

Some politicians and commentators in the West have said the "super-abundant savings from fast-growing emerging nations" sowed the seeds for the US and global credit bubbles and are also responsible for the global economic imbalance. They had suggested that the yuan be allowed to appreciate faster to cut China's foreign exchange reserves.

"People may think the exchange rate and interest rate are deciding the relationship between savings and consumption, but in reality things are much more complicated," Zhou said.

Factors like special traditions, cultural differences, family structure and demographic features of East Asian economies explain the high savings rate of those countries, he said. People in East Asia, for example, tend to save more due to the tradition of thrift even if their income increases.

Many East Asian countries have a savings rate of about 40 percent against their GDP while that in the US and UK is less than 20 percent.

The history of the countries that suffered from the 1997 Asian financial crisis has also prompted them to pile up foreign exchange reserves as a tool to prevent reoccurrence of the financial crises, Zhou said.

"Failure of some countries to adopt necessary regulation on speculative capital and adjust relevant regulatory framework and failure of relevant international organizations to take the responsibility of regulating irregular capital flows have forced the East Asian countries to accumulate large amounts of foreign exchange reserves to protect their economy."

China has made relentless efforts to cut its savings rate, but it will not work in the short term because it is the result of deep-rooted social and cultural factors, he added.

Zhou also called for reforming the international currency regime in the long term, making it more diversified and less dependent on the US dollar.

(China Daily February 11, 2009)