China's Current Trade Imbalance - Building Gender Balanced Business

Columbia professor Shang-Jin Wei has proposed a novel theory to explain the global trade imbalance: the skewed Chinese sex ratio. Wei has suggested that because there are more men competing for fewer women in China, the men are more motivated to save money in order to prove that they are wealthy and successful marriage prospects. The result, says Wei, is China’s current-account surplus.

China’s “one child” law, adopted in the 1980s, has created a major sex imbalance

• Many couples have aborted female fetuses because they prefer to have a boy
• In 1997, the ratio was 122 boys to 100 girls
• 1 in 9 Chinese men will likely never marry due to the lack of women

The impact that China’s reproductive policy will ultimately have on the country remains to be seen, but it already may be making an impact on the global economy

Trade imbalances – most notably the Chinese current account surplus and America’s current account deficit – are considered to be a cause of the financial crisis

Economists such as Paul Krugman believe that China’s current account surplus is a result of its exchange-rate policy and argue that balance would be restored if China revalued its currency

But Shang-Jin Wei argues that the larger cause of the surplus is that the Chinese people are saving too much

The Chinese penchant for saving is usually blamed on the lack of social welfare to act as a safety net, but Wei claims the saving is actually due to the uneven sex ratio

With fewer women available, men and their parents are trying to accumulate wealth in order to better attract a potential wife

Wei believes that capital accumulation in the corporate sector is also due to the sex ratio, because young men and their parents are more likely to become entrepreneurs; Wei discovered that areas with a more skewed ratio have higher rates of entrepreneurship