For Pettis’s argument to be true, that in China consumption spending is low relative to investment because households are getting short end from government and corporations, corporate savings would have to be the source of high savings rate. This does not line up with the facts. https://twitter.com/ftchina/status/1298138309902958593

In fact China’s corporate savings is pretty typical compared to other countries. It’s *household* savings that is unusually high. Consumers *aren’t* being poorly compensated relative to gross output. They are simply choosing to save what they earn.
https://www.imf.org/~/media/Files/Publications/WP/2018/wp18277.ashx

There are a lot of reasons consumers choose to save rather than spend, but they more or less all come down to point that most households would rather hold out on smaller present consumption for a larger future consumption, ala property, a car, anticipated emergencies, etc.

For the middle class one main motivation is that houses act as a proxy for both wealth for their family *and* a retirement plan, because kids are expected to take care of their parents, while the parents in turn provide free child care for grandchildren.

For the lower class, it’s also because marginal income is often not high enough to meaningfully improve standard of living anyways, so money is saved for major life expenses like weddings or emergencies, or for future capital improvements (like new farm equipment)

For all classes another big motivation for savings is for developmental benefit of kids. The sort of spending upper class people do for kids in developed countries is *also* present for lower class people in China because education is seen as a generational ticket out of poverty.

So while it’s true investment spending in China is huge, sometimes inefficient or misallocated, it’s *not* true that this represents deprivation of choice for consumers. Chinese consumers are the ones making choice to save, because they want more capital goods over consumables.

One big reason so many in China care more about capital goods over consumables is simply that on per capita basis China is still barely middle income, and most are below median, so people would rather spend on things that can increase future earnings than improve current welfare.

It’s debatable whether China’s economy delivers on private demand for capital goods effectively or efficiently, *but* what shouldn’t be in doubt is that capital intensity of China’s economy is driven as much by private individual as state, rather than one at the expense of other.

Other reasons that contribute to China’s high savings rate include underdeveloped state of consumer credit systems for most of country, financial system in general being more geared towards corporate rather than household products, debt being pretty serious cultural stigma, etc.