factor as the key contribution to savings ratio have been inconclusive. some members of academia maintain that high savings is related to the level of wealth as measured by per capita gdp. some analysts believe it is related to exchange rate, financial intermediation, the development of capital market, national tradition, demographic structure, and the social security system. opinions also diverge on whether exchange rate is correlated with savings ratio. they are correlated to some degree, but the coefficients are generally low and the correlation usually statistically insignificant. it therefore seems over simplistic to believe that adjusting exchange rate may influence savings ratio. in july 2005, china carried out the reform of the rmb exchange rate formation mechanism. meanwhile, we emphasized the importance of shifting the growth pattern to increase the contribution of domestic demand to growth. a series of measures have been adopted to stimulate domestic demand. the economic restructuring package underscored encouraging rural consumption, developing the services sector, especially the cultural and recreational industry, and adjusting the consumption structure and pattern. identifying the key contribution to savings ratio is a major policy challenge for all countries concerned. in the face of diverse opinions, it is important that we truly understand the contribution of different factors to savings ratio before we can come up with an effective policy tool kit to adjust savings ratio. i. high savings ratio in east asia and oil - producing countries can be attributed to a number of causes the generally high savings ratio in east asia can be attributed to multiple causes : first, national tradition. influenced by confucianism, people in the region value thrift, selfdiscipline, low profile, and are against extravagancy. second, culture. we may be able to trace the cultural differences from a large number of textbooks and classic readings. for instance, latin american countries are comparable to east asian countries in terms of national wealth. however, savings ratios in these countries are low, and this can be attributed to the cultural differences in the region, where people have a higher propensity of consumption and tend to quickly use up all their salaries. third, family structure. in east asian countries, families feature close bonds between family members, and the society relies heavily on families, which are given great social responsibilities. in china, for example, a typical family takes care of the old, raises children, and is responsible for children ’ s education ( including overseas education ) and skill training. in contrast, families in some developed countries shoulder fewer responsibilities, as the will to

and opening policy, the production and transaction activities of enterprises and the banking credit business are under the planned economy. the sole ownership by the state blurred the relationships of interest by different participants of transactions, which not only weakened china ’ s traditional credit culture, but also influenced the evolvement of china ’ s traditional credit culture to the modern credit culture. therefore, establishing china ’ s modern credit culture in line with the development of socialist market economy is of urgent necessity as the reform and opening policy is steadily promoted. the main difference between “ modern credit culture ” and “ china ’ s traditional credit culture ” lies in its unique social, institutional, professional and commercial features. credit is hence no longer solely based on the assessment of individuals of the borrower who they know personally but also on assessment of others that the borrower has no direct contact at all, is no longer solely based on ethics but also on legal and institutional rules, is no longer solely based on information obtained from face - toface contacts but also on the analysis and judgment of a specialized third - party, and no longer is limited to the use of borrower and lender, but also acquires the nature of public goods. these features of modern credit culture develop it into a huge industry and hence have a far - reaching impact on the social and economic life. the chinese government is fully aware of the importance of establishment of china ’ s modern credit culture. the third plenum of the 16th central committee of cpc has put forward clearly that “ efforts shall be made to establish and improve the social credit system, in a bid to form the social credit system supported by ethics, based on property rights and safeguarded by laws, which constitutes necessary conditions for constructing the modern market system ” and that “ efforts shall also be made to speed up construction of the corporate and personal credit service system in accordance with the direction of improving laws and rules, operating by franchise, commercial management and specialized services. ” corporate and personal credit is the foundation and core for social credit. premier wen jiabao has emphasized on several occasions that efforts shall be made to speed up the construction of unified national basic database for corporate and personal credit reporting, to step up credit reporting legislation, to promote development of credit reporting sector, to actively develop specialized credit reporting agencies, to open the credit reporting market step by step by setting priorities, to establish gradually the system of punishment against default on credit, to standardize operation of credit reporting agencies and to strengthen supervision and management of the credit