China has to accelerate social security reform in order to reduce precautionary savings, said Zhou Xiaochuan, China's central bank governor, on Thursday.

High savings rate in China is linked to the Chinese culture which discourages over-spending, to the structure of the society, to the family value and may other factors, Zhou told a session of the World Economic Forum.

"Talking about the export sector and overseas investment, it's related to the savings rate. In China, the savings rate is a little bit over 40 percent of the GDP," Zhou said.

"China is undertaking several reforms related to the safety net: pension system reform, medicare reform and education (reform). This is a transitional period and the population does not feel good enough in terms of certainty to spend money. So temporarily there is an intention to save higher than they should.

"China should accelerate the reforms in the pension system, in medicare system and education system to reduce the so-called precautionary savings and to let the savings rate down to normal percentage of our GDP."

In response to concerns that the U.S. would suffer if China's savings rate is to be cut as a sizable portion of the Chinese savings is used to buy American treasury bonds, Zhou said the movements of savings from one country to another is the result of globalization.

Previously lots of savings from other countries had come to China in the form of foreign direct investment, he said.

What needs to be looked out is that whether the movement pattern is healthy or not, he told participants of a session on Chinese companies' overseas ambitions.

The lack of domestic demand as a result of the high savings rate in China is driving companies to export even more, said Zhou, adding that there is a need to boost domestic demand.

Source: Xinhua