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Thread: Preference for Sons in China leads to U.S financial crisis?
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[quote=LEONARDO,370785](Source: Wall Street Journal http://blogs.wsj.com/chinajournal/2009/06/18/preference-for-sons-in-china-may-lead-to-bubbles-in-us/ ) June 18, 2009, 11:07 PM ET Preference for Sons in China May Lead to Bubbles in U.S. Chinese parents’ preference for sons has given rise to a brewing social problem. With the advent of inexpensive ultrasounds, far more boys than girls are born in China – which has in turn given rise to a growing number of rootless, unmarried men. The “missing women” problem may have also contributed to the U.S. housing and credit bubbles, new research suggests. Through the first half of this decade, America bought far more than it produced, running up an a massive tab with its trading counterparts. In an effort to explain why this had happened, then-Fed governor Ben Bernanke in 2005 identified a “global savings glut.” Developing countries – China in particular – were saving more. Those savings were getting put into long-term debt, pushing interest rates lower. “In particular, during the past few years, the key asset-price effects of the global saving glut appear to have occurred in the market for residential investment, as low mortgage rates have supported record levels of home construction and strong gains in housing prices,” Mr. Bernanke said. Mr. Bernanke’s explanation for the savings glut in the developing world was that the financial crises of the 1990s had convinced countries that they needed to hold more cash in reserve. While there is probably truth to that, the jump in China’s savings still raises an eyebrow. In 2007, Chinese household savings as a share of disposable income was 30%, up from 16% in 1990. One possible reason for the jump in savings: The dearth of women is making China’s marriage market extremely competitive, and families with boys are accumulating wealth to make their sons more attractive matches. In a paper recently posted to the National Bureau of Economic Research’s website, economists Shan-Jin Wei, at Columbia University’s Graduate School of Business, and Xiaobo Zhangk, at the International Food Policy offer evidence why this might be so. They find that in areas where the male-to-female sex for young Chinese is high, savings rates are higher, too. And they find that households with sons save more in high male-to-sex ratio regions. “[W]hile the paper focuses on evidence from China, the basic mechanism can in principle be applied to other countries,” the economists note. “Indeed, other economies known to have a strong sex ratio imbalance include Korea, Taiwan, Hong Kong, Singapore, and India. These countries also happen to have high savings rates.” [/quote]
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