ANALYSIS THE RELATIONSHIP OF INFLATION RATE, INTEREST RATE, EXCHANGE RATE AND GDP TOWARDS HOUSEHOLD SAVING DEPOSIT IN CHINA

Abstract

There is an increasing trend in the Gross Domestic Savings in China since 1978 until now. It has continued with the savings ratio rising from 35% in 1978 to around 51% in 2012. This study is an analysis on the effects of changes in household saving and the factor affecting the household savings in China. The time period is monthly based from the January, 2010 until September, 2013. This model traces the relationship between four independent variables inflation, exchange rate, Gross Domestic Product, and Interest rate and dependent variable saving deposit. Based on the F test, the research find out the Chinese household saving is affected by all these four independent variables simultaneously. The regression analysis shows that in the time periods household savings will decrease consistently in respective of the increase of exchange rate and inflation rate. However, it is not always true that the saving deposit will increase with the rising GDP and interest rates. Furthermore, according to t test, the exchange rate is a significant factor affecting saving deposit in China. from this research, the researcher recommend that The People's Bank of China have to focus on the fluctuation of exchange rate between Chinese Yuan and US dollar and inflation rate, which may affect the domestic household saving and financial market in China.