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Son Preference

by Elaine Schwartz    •    Jul 30, 2010    •    295 Views

If there are 122 men for every 100 women, how do you find a wife? According to a Columbia University professor, in China, you save.

Economists have been asking why Chinese households save so much–30% as compared to a current 6% rate in the U.S. One answer starts with the hypothesis that too many Chinese men have too few women they can marry. How to compete? Become richer by saving. To prove their theory, researchers gathered data and found that savings rates appeared to vary with an area’s male/female ratios. Or, as expressed by one social scientist, it was all about “keeping up with the Zhangs”. 

Why does all of this matter? 

  1. Domestic saving relates to an undervalued yuan. More saving in China has helped their current account surplus grow. This surplus helps the yuan remain undervalued. An undervalued yuan perpetuates a U.S. trade deficit as the U.S. continues to buy Chinese exports.
  2. Domestic saving also relates to women’s rights. With China’s one child policy and son preference leading to male births, the result was “missing women” and a social issue becoming an economic concern. Defined, “missing women” is a gender inequality phenomenon in which a country’s demographics become artificially skewed toward male births and male survival. (You might want to look at nobel laureate Amartya Sen’s comments.)

The Economic Lesson

An undervalued Chinese currency has become an economic and a political concern. Just like we might purchase a sweater when it is cheap, we tend to be attracted to less expensive currencies. Owning the currency enables us to buy that nation’s exports more cheaply. Hence, we buy Chinese goods, look to Chinese factories, and inflate our trade deficit.

But what is the cause of the problem? Some say we should focus less on the Chinese government’s control over the yuan and more on their social policy toward women. 

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