By empirically testing, with the buffer-stock model, the correlation between the expenditure uncertainty in education, housing, and medical service and the savings for the Chinese, we find that the Chinese precautionary saving behavior is significant. Furthermore, our results also show that the precautionary saving motive is better explained by the models with target ratios as the dependent variable than those with the saving levels as dependent variables. It is absolutely necessary to establish a sound medical protection system as well as to make further progress in education reforms so that the large size of our savings can be reduced.

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