If anyone on the planet can afford to head down to the neighborhood mall and indulge in a shopping spree, you'd think it would be the Chinese. After all, they live in an economy that routinely posts growth rates of 9% or higher, resulting in surging incomes and boundless job opportunities. While much of the world experienced GDP contractions and dramatic spikes in unemployment during the Great Recession, China, supported by massive stimulus programs, barely missed a beat. In theory, as income increases, and the prospects for future earnings become brighter, families should be more willing to postpone savings and spend now.

But in China, just the opposite is happening. It's still proving difficult to convince the average Chinese to part with his or her money, even though his or her stash of cash is bigger than ever. Sure, Chinese consumers are spending more and more each year on items like cars and appliances. But simultaneously, the urban Chinese household saves twice as much of its income today as 20 years ago – from 15% in the early 1990s to over 30% in recent years. Oddly, as Chinese incomes have grown, so has their propensity to save.

The fact that Chinese are saving more is of great importance to all of us. Getting the Chinese to spend is necessary to restore the global economy to true health. If the world is to “rebalance” – or eliminate the massive surpluses and deficits that underpinned the Great Recession – consumers in surplus nations like China need to spend more. If they did, China would import greater quantities of stuff from the rest of the world and reduce its giant trade surplus, while simultaneously shifting China's sources of growth away from its unhealthy dependence on investment (in sectors like property). However, the role of consumer spending in China's economy has been heading in the wrong direction. Private consumption accounted for 46% of GDP in 2000; by 2009, that ratio had fallen to about 35%. Very simply, the sources of Chinese growth aren't rebalancing, and without that, the entire global economy can't rebalance either.

Why won't the Chinese loosen their wallets? A new study by economists Marcos Chamon, Kai Liu and Eswar Prasad sheds some light on the financial calculations of the average Chinese. After studying Chinese statistical surveys of household incomes dating back to the 1980s, they conclude that even though Chinese incomes have increased, so has the uncertainty Chinese feel about their income, due to the market-oriented nature of Chinese reforms. And as a result of that heightened uncertainty, Chinese are more inclined to save a larger proportion of their income even in a rapid-growth economy.

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