Chinese savings rates are high and it is often proposed that this is because of the need for high levels of precautionary savings. According to the buffer-stock model, the target precautionary wealth ratio should be related to expenditure uncertainty. It is hypothesised in this paper that there are three categories of household expenditure that are especially important in China: medical care, housing and education. Provincial level data are used to explore this relationship in a dynamic panel model. Rising health expenditure is found to lead to an increase in the target wealth ratio, while rising income levels have decreased the target wealth ratio.

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