In recent years, no OECD or emerging market economy had a ratio greater than 30 percent (averaging over three years to smooth out cyclical efects) . . . Even compared to Korea and Japan during their boom years, the ratio in China today looks high.41
The rising investment was paid for out of total savings in the economy also rising to over 50 percent of output. Some of the saving was by workers and peasants, who needed it in order to pay for emergencies like medical care and for their old age. Effectively, they handed over a portion of their incomes to state-run banks which have then loaned it to state and privately owned enterprises. But in the early and mid-2000s an increasing proportion of saving came out of the profits made by companies, which rose by about 5 percent of GNP in the early 2000s.42 This was possible because household consumption as a share of output fell sharply, to only about 40 percent,43 with the share of wage income falling from 67 percent in the 1970s to around 56 percent in 2005 (see graph).44 ment or private American consumption (graph45), which then provided an outlet for further Chinese exports.
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The New Age of Global Instability