One Fine Day in Liberation Square

One year ago, Egyptians took to the streets in protests that shocked the world, and changed the course of the entire Middle East.

The events of Jan. 25, 2011, may have come as a shock, even to those who participated. But it was no overnight phenomenon -- more like the sudden flowering of seeds patiently planted over years and years.

"I was shocked. Everyone was. I don't believe anyone who says they knew it would be like that. I had an ear-to-ear smile on the whole day," said Wael Khalil, who had been working for revolution among socialist activists for the past 20 years. "I think of it like concentric circles. It started with a small circle of activists. Kefaya [a coalition founded in 2004 to protest President Hosni Mubarak's hold on power] expanded the circle, the 2005 elections expanded the circle. Khaled Saeed [a young Egyptian man whose violent death, at the hands of Egypt's security forces, became a rallying cry for protesters] was huge."

Nobody was quite sure just what to expect that day. A group of young activists, depending heavily on social media, had announced a day of mass protests, partially in honor of the successful Tunisian revolution 11 days earlier. Jan. 25, a Tuesday, was mischievously chosen because it was also a national holiday: Police Day. The holiday commemorates the 1952 struggle of the Ismailia police force against the occupying British. In the minds of the activists, it became a focal point for an outraged condemnation of the behavior of police and the Interior Ministry in general.

Mohamed Adel, a spokesman for the April 6 movement, one of the youth movements that had pressed for change in Egypt for years, told a local newspaper, "Egypt's police have become [criminals] who don't care about protecting the people, unlike the heroes of 1952."

There was, among some quarters, a certain satisfaction in turning Police Day on its head. As Nora Shalaby, an archeologist and passionate social media activist put it in a tweet around noon on Jan. 25:

It's really satisfying to c Egyptian police officers working & anxious on their day off #jan25

It wasn't the first, or even the tenth, day of mass national protests called for in the previous few years. But this one felt a little different going in. The wounds of Khaled Saeed and the mass insult of the parliamentary elections were still fresh in the public psyche. A growing number of citizens had simply ceased to care about the potential consequences of political action. A politically desensitized population was being re-politicized by their unacceptable realities. The old Egyptian saying of "walk next to the wall" -- mind your business, feed your family, and don't get involved in matters of governance above your station -- was becoming irrelevant; minding your own business in Egypt in 2011 still wouldn't protect you from economic insecurity, institutionalized corruption, nepotistic hiring practices, or a predatory police state.


I was originally scheduled to travel to Dubai on Jan. 25; my wife, Rola, was already there waiting for me. Hearing all the rumblings and mindful of Tunisia, I decided to delay the trip by a day or so, just to see what happened. By the end of the day, it was clear that I wasn't going anywhere. It was still way too early to predict where all this was going, but something unprecedented was happening.

Organizers originally called for crowds to gather outside the Interior Ministry, near Tahrir Square. On the surface, that seemed like a tactical mistake. Gathering in the tightly confined urban space of Lazoghly Square would enable the Central Security troops to practice their well-honed tactics of bottling up protest groups with overwhelming numbers. Anyone gathering in Lazoghly would be easily surrounded, and anyone seeking to join the protest in progress would be just as easily prevented from approaching.

The Interior Ministry plan turned out to be a clever ruse; at about 10:30 in the morning, the word went out through Twitter and Facebook about a whole new set of gathering points and contact numbers. The turnout exceeded all expectations; from the start, it was clear that this was, the largest demonstration Egypt had witnessed in years. I spent the day moving throughout downtown Cairo, trying to keep track of a dizzying set of fast-moving events.

Throughout the day, different groups of protesters flowed organically through downtown Cairo, many of them meeting little resistance. There was a carnival atmosphere, and protesters saluted each other and joined forces, moving through the city with no set plan -- only an unspoken understanding that something new was happening and that they would all eventually meet in Tahrir.

The black-clad riot troops of Central Security dutifully deployed in their usual overwhelming waves. But for the first time in recent memory, the troops seemed potentially outnumbered by the protesters, who simply pushed through their ranks. The Central Security cadres looked strikingly unprepared and completely miserable; they weren't used to a fair fight.

The security troops also seemed to be operating under orders, at first, to deploy a soft touch. Perhaps out of concern over how the Tunisian uprising had captured imaginations across the Middle East, authorities seemed concerned to avoid a major public crackdown. At the beginning of the day, the Central Security forces deployed without their usual batons and riot shields, locking arms to form a human barrier to pen in demonstrators. That tactic quickly proved to be almost comically ineffective.

The first real physical confrontations I witnessed were outside the Supreme Court downtown -- a common flash point since it sits adjacent to the Lawyers Syndicate and Journalists Syndicate, both longtime nerve centers for protests and activism. The two neighboring professional syndicates are symbolic of how opposition politics worked for years under Mubarak. Both, in their time, served as hotbeds of government opposition; but they also clearly demonstrate how Mubarak's forces would allow limited "steam vent" protests to express public frustration without actually threatening to change anything.

For years, you could say pretty much anything you wanted outside either syndicate building, far more than you ever could say in Tunisia, Syria, or Libya -- as long as you didn't try to move from your spot. The Lawyers Syndicate, in particular, had a walled-in courtyard with a front gate that served nicely as a natural choke point to keep protests inside. At the Journalists Syndicate around the corner, protesters frequently gathered on the wide steps of the building's entrance, where they would also be surrounded by riot cops and penned in place. Most of the time, Central Security forces were able to keep matters so effectively bottled up that traffic would keep flowing past the buildings, with passing drivers barely noticing one more noisy distraction.

It was a solid plan and it worked for decades. But it was entirely built around the concept of overwhelming security numbers -- that there would always be more police than protesters. Jan. 25 was the first time I had ever witnessed where the numbers weren't heavily in the government's favor.

"All day you had this sense of euphoria," said Mohamed El Dahshan, who had returned to Egypt one day earlier after helping monitor the referendum on independence for South Sudan. "It was like, 'Fuck it, there's a lot of us!' No more getting cordoned by a measly couple hundred Central Security people.... You would walk with people you recognize, lose them, find some others, and walk and chant with them."

Across the river, on the Giza side, the blogger Mahmoud Salem (who writes under the online moniker of Sandmonkey) started his day outside the Moustafa Mahmoud Mosque -- a central hub in the commercial district of Mohandessin. At about 12:30 in the afternooon he was sitting inside Cilantro, an upscale coffee shop across Arab League Street from the mosque, waiting for some friends to arrive. Suddenly four police officers entered and started demanding IDs and detaining all veiled women and bearded men -- basically anyone who looked like an Islamist. The government clearly still thought the primary threat that day would come from the fundamentalist ranks. "They left my group alone because we looked like frou-frou upper-class Cilantro people," Salem said.

Eventually he ended up in a 500-strong march that tried to cross the Nile and head toward Tahrir. But Central Security had effectively cut the city in two, blocking multiple bridges in the center of the city. Unable to cross the Galaa Bridge, Salem and his group moved north to the October 6 Bridge, but found that also blocked by overwhelming security numbers. In a moment of pure inspiration, Salem found a Nile-side fisherman with a motorboat and gave him LE150 (about $25) on the spot to deliver him and a few friends across the river and right up to the entrance to Tahrir Square.

"We called it the Egyptian Freedom Flotilla," Salem said, laughing proudly. "There was even an Egyptian flag on the side of the motorboat!"

Back at the Supreme Court, after a bit of back-and-forth shoving, the crowds started to overwhelm the police, who scrambled to keep up. For a while, it was almost playful; groups of police and protesters would race to reach this or that intersection in time, often running side-by-side and jostling for position. One group of marchers, moving through the Boulaq area, seemed to make a point of recruiting as they went.

Protesters openly appealed to the sidewalk gawkers to join and chanted, "Raise your voice/he that shouts won't die!" (It rhymes in Arabic.)

"Join us, you won't go to jail," one young man shouted to a group of youths watching from the sidewalk. "Don't be afraid. The fear is what keeps us from changing."

The dominant chant, the first time I'd heard it in years of covering Egyptian protests, was a direct import from Tunisia: "The people demand the fall of the regime!"

Even among those who didn't join in, there seemed to be a high degree of emotional support for the marchers. A chubby young mother carrying a wriggling toddler gave the protesters a thumbs-up. Down the block, a grandmother gleefully clapped and chanted along. In a powerful moment, a 300-strong group of protestors came across another, larger, group of demonstrators marching the opposite direction along the Corniche near Tahrir Square. The two groups embraced amid raucous cheers and started marching together.


The sight of Tunisians driving the similarly entrenched Ben Ali from power had unblocked something in the psyches of the protesters. Now that they knew it was possible, people couldn't wait to get on with their own liberation.

There was also, it must be noted, a certain level of brotherly Arab competitiveness on display. Egyptians have always prided themselves on being the cultural and political leaders of the Arab world -- even in the last few decades when that boast began to ring rather hollow. The sight of the Tunisians (the Tunisians, of all people!) accomplishing what Egyptians couldn't do had rekindled that semi-dormant sense of Egyptian competitive pride -- as if liberation was some sort of African Cup match.

Mahmoud "Sandmonkey" Salem, frames the matter rather indelicately as "the small penis theory" of Middle Eastern politics. "Machismo played a big part of it," he insists. "Egyptians looked at Tunisia and said, ‘Wait that's possible? And you're just fucking Tunisia! We're Egypt!'"

Other protesters expressed similar sentiments in more delicate terms. "Tunisia has encouraged a lot of people. I was one of those people who never got into politics," said one woman in her mid-fifties who declined to give her name.

Downtown, a few yards away from where demonstrators were clashing with riot police outside the Supreme Court, a young protester seemed to capture the brotherly competitiveness best. "The Tunisians have become better than us. They're real men," Ahmed Eid told me.

Eid was a classic profile of young Egyptian frustration. An educated middle-class youth, he saw no hope and no future for himself under the current system. Despite holding a law school degree, he was still unemployed after graduating four years earlier. In Egyptian social mathematics, this also meant he was still living with his parents with virtually no hope of ever getting married (which probably meant no hope of ever having sex) and actually starting his life.

"We've been silent and gone hungry for a long time," Eid said. "If we continue like this, we will change things, we just have to commit."

As 1,000 protesters jostled with riot police outside the Supreme Court downtown, on a deserted stretch of 26 July Street, a young family walked arm in arm down the middle of the street gleefully chanting, "Down with Hosni Mubarak!"

It became apparent that something different was happening here than the usual semi-annual bursts of public frustration. The anger and the desire for change had metastasized. Whatever anyone says about the Egyptian revolution, it wasn't just "the youth" that brought Mubarak down. The youth led the way, for sure, often showing courage that their elders had long since surrendered. But from the very start it encompassed people of all ages, including innumerable two- and three-generation families, all adding to the protest lines.

One woman in her mid-forties, who declined to give her name, said she had never before gotten involved in politics. But on Jan. 25 she came out with her two teenage sons, "to show them that it's possible to demonstrate peacefully for change."

At about three in the afternoon, the crowds converged on Tahrir Square, the massive public space on the edge of downtown that's the traditional heart of the city. The protesters filled up more than half the square; that's when the riot police started hauling out the heavier tactics -- including baton charges, water cannons, and tear gas. In a surreal interlude, at the Talaat Harb Street entrance to Tahrir Square, there was a mass of protesters and Central Security cadres -- all gagging on the same tear gas. Despite the violence on display, the day contained its share of dark comedy: the now-desperate Egyptian riot police were throwing rocks back at protesters.

A tense standoff reigned for hours. Several times, the riot police scattered the crowd with choking tear-gas volleys, but the protesters kept regrouping and coming back for more. In the midst of confl ict, there were numerous moments of détente and even sympathy between the two warring sides. Many of the Central Security soldiers and commanders seemed to understand the frustrations of the protesters, and many of the protestors seemed to understand that the Central Security was the most immediate threat -- but not the real problem.

Mohab Wahby, a young development specialist, recalls a rather civil negotiation with a Central Security officer who told him, "I understand your anger, but what can I do? These are my orders."

As news of the clashes spread, the various protest groups began converging on Tahrir to provide reinforcements. Just before 4:00 P.M. just as the police were potentially starting to turn the tide, a thousand-strong march rushed in from the direction of Abdin with a huge roar, adding fresh numbers and momentum to the protesters.


As evening approached, "The discussion became, 'Do we stay or not?' People were saying, 'If we leave, we'll never take the square again.' Then people started getting blankets and food," said El Dahshan.

Fresh bodies began flocking to the square, having heard the news of its occupation by protesters. Someone brought a microphone and speaker system and the speeches began. Political and cultural leaders like Alaa Al Aswany, author of The Yacoubian Building, started appearing on the scene and determination hardened around the idea of an open-ended sit-in.

The protesters managed to hold onto Tahrir for about nine hours that day. At about one in the morning, when the crowds had thinned a bit, police violently cleared the square using volleys of tear gas and baton charges. "We were really getting into sleep mode, and then suddenly here comes the cavalry," El Dahshan said. He and others fled through the side streets of downtown with Central Security chasing them and throwing rocks.

As he was catching his breath and regrouping with friends outside the famed downtown café called Horreya, El Dahshan witnessed something that made him realize the battle wasn't going to be won that day. "Around two A.M., I saw a police paddy wagon stop and drop off about a dozen guys in civilian clothes with sticks," he said. "I didn't stick around for long after that."

As they were being run out of Tahrir, one group of protesters made a brief, disastrous attempt to invade the grounds of the NDP headquarters, which are tucked away behind the Egyptian Museum at the northern edge of the square. They were overrun by police and savagely beaten, said Wahby, who witnessed the scene from above on the October 6 Bridge.

The day ended in defeat for the protesters, but the turnout had already surprised all sides and officially taken Mubarak's regime into uncharted waters. "By the end of that night, I naïvely thought we had already won and that Mubarak was gone," Wahby recalled. "You went home and you were thinking, 'I'm coming back tomorrow no matter what.'"

Organizers, sensing the initiative was on their side, called for Friday, Jan. 28, to be a massive "Day of Rage" protest. Hundreds of thousands of Egyptians would take part across the country, thwarting the Mubarak regime's last-ditch attempt to quell the protests through shutting down Internet and mobile phone services. Pamphlets widely distributed among protesters the following day clearly conveyed that sense of unprecedented confidence and momentum.

"We have started an uprising with the will of the people, the people who have suffered for 30 years under oppression, injustice, and poverty," read the Arabic language text. "Egyptians have proven today that they are capable of taking freedom by force and destroying despotism."


Democracy Lab

Why the Chinese Save

Contrary to conventional wisdom, China's high savings rate has everything to do with policy and institutions. Culture, not so much.

Sheldon Garon, who teaches in both the history and East Asian studies departments at Princeton, is a leading scholar of Japan. But his timely new book, Beyond Our Means: Why America Spends While the World Saves (Princeton University Press; all rights reserved) takes on an issue that’s also important to contemporary policymakers in transition economies: Why some countries save far more of their income than others.

The received wisdom, heavily influenced by the experience of Japan and the east Asian Tigers, is that families’ decisions about savings are generally driven by cultural values derived from Confucian teachings and are thus largely beyond the reach of government policy. So countries on the cusp of development that lack the savings bug – for example, Mexico and South Africa -- must either import large amounts of capital or make do with lower rates of investment. But in this excerpt, which focuses on China, Garon suggests that savings behavior is far more subject to deliberate government manipulation than is generally understood. – Peter Passell


To be sure, many East and Southeast Asian societies appear culturally disposed toward thrift. But I question the timelessness and uniqueness of so-called Asian values regarding saving and consumption.

As heretical as it may sound, the widespread “urge to save” in Asian economies has less to do with their shared “Asianness,” and may be more related to their common adoption of savings promotion practices from other countries.

Although European colonial powers introduced some of the methods, the primary catalyst has been Japan and its historic efforts to increase national savings. Before 1945, Japanese imposed the "Japanese model" on their colonies and occupied territories. More recently, Asian nations consciously emulated the policies underlying postwar Japan’s economic miracle.

Following World War II, international organizations and economists advised developing nations to “mobilize domestic savings” to finance growth. By the 1960s, Japan emerged as the poster child in this international campaign. Led by the influential planner Okita Saburo and his Japan Economic Research Center, Japanese economists touted high saving rates and low consumption to explain the nation’s rapid growth—and “its implications for developing countries.”

After the yen sharply appreciated against the U.S. dollar in 1985–87, Japanese officials became outright missionaries for the cause. As Japanese businesses heavily invested in Southeast Asian production, representatives of the government confidently counseled Southeast Asian states to mobilize household savings. Japan’s Postal Savings Bureau played a leading role, funding yearly meetings of Asian government savings bank officials. Japanese bureaucrats would lecture counterparts on the virtues of the nation’s postal savings system, citing its historical success in establishing the “idea of saving in the minds of the people.” The state’s promotion of saving, they asserted, had proved invaluable to curbing inflation, accumulating capital, and stabilizing society at large.

Similarly the Bank of Japan sponsored working seminars on “savings promotion,” which brought together central bank officials from Asia and the Pacific. These meetings marked one more chapter in the little-known story of learning from the Japanese experience among emerging Asian economies—including South Korea, Singapore, Malaysia, and China.

Savings in China

Fears of excessive saving by an Asian giant are nothing new. Two and a half decades ago, Japan’s high saving rates and alleged under-consumption became a flashpoint in international relations. American commentators worried about the loss of national sovereignty as Japanese savings flowed into huge purchases of U.S. Treasury bonds and bills.

At a certain point the media lost interest in the story, even though the Japanese government remained the number one foreign investor in Treasury securities until recently. Today, of course, U.S. complaints single out the Chinese for over-saving (typically framed in terms of China’s policy of keeping its currency exchange rate low). A spate of recent books sounds the alarm about Americans’ reliance on Chinese savings to finance their addiction to consumer and mortgage credit.

No one can say for sure how much the Chinese people save. Data based on national income is incomplete; nor does it accord with international standards. The most credible estimate places China’s household saving rate for 2007 at nearly 26 percent. This is extraordinarily high, although in line with rates in Japan, South Korea and Italy in previous decades.

Common explanations of why Chinese save have been less than satisfying. Most popular are invocations of “culture” -- just as we’ve seen elsewhere in Asia. More often than not, Chinese leaders trace the nation’s thriftiness back to Confucian values. Compared to Americans who became accustomed to overspending, observed the official China Daily, the Chinese people have developed a “tradition of savings since ancient times.” Zhou Xiaochuan, governor of China’s central bank, recently defended his country’s high saving rate as in large part the product of Confucianism, which values thrift, self-discipline, moderation, and an aversion to extravagance.

There is something rather forced about these claims. Back in the 1960s, Chairman Mao Zedong denounced Confucius as a “stinking corpse.” Only in the last 20 years has the Chinese Community Party conveniently rediscovered the sage’s age-old influence on popular behavior. Ironically, the inspiration came primarily from abroad, from Confucian revivalists in Singapore and Taiwan and from Westerners who write about the development of “Confucian capitalism” in Japan and the rest of East Asia.

Cultural explanations are all the more dubious when we consider the following: Not so long ago, the Chinese people were terrible savers. Under Maoism from 1952 to 1978, household saving rates did not exceed 2 or 3 percent and often sunk to less than 1 percent. If Chinese saved at impressive rates thereafter, surely other factors rank higher than Confucianism.

Another explanation favored by American economists and journalists is that Chinese save excessively in the absence of adequate welfare programs. It is an argument sustained by constant repetition, and little evidence. This analysis comes complete with its own policy recommendation. In the words of the influential economist Stephen Roach, China should build an institutionalized safety net necessary to temper the “fear-driven precautionary saving that inhibits the development of a more dynamic consumer culture.”

Uncertainty, it is true, may motivate people to save, but so do many other factors. The correlation between high saving and inadequate social benefits is a weak one, globally. Scores of poor nations provide little in the way of social welfare, yet their saving rates are minuscule. Among advanced economies, high-saving nations in continental Europe all provide comprehensive welfare benefits. Americans, who aside from the elderly lack sturdy safety nets, conversely saved little in recent decades.

There are, however, better explanations. In China, household saving rates have risen in tandem with rapid economic growth. We have observed this pattern in Asia’s other success stories, as well as in Western Europe after World War II. Following Mao’s death and the advent of Deng Xiaoping in 1978, the party-state fundamentally transformed the Communist economy into one based on global trade, foreign investment, and the partial embrace of market principles. The Chinese economy leaped into high growth, the GDP surging 10 percent annually from 1980 to the present. As elsewhere, household savings rose as consumption lagged behind increases in incomes.

Second, Chinese save more because of poor access to credit. Saving tends to be inversely related to borrowing. American journalists glory in the story of Chinese conspicuous consumption and the spread of credit cards. Most of these “credit cards” are, in fact, debit cards tied to bank accounts. Only a small fraction offer revolving credit. The heavily regulated banks have been miserly in extending consumer credit, and they generally require stiff down payments before lending money to homebuyers.

This is in sharp contrast to the United States, but not so different from several Asian and European countries where consumer and housing credit is subject to significant regulation. In a fast growing economy like China’s, people want to buy cars and other durables, but in lieu of easy credit they need to save in order to consume.

Curiously, few observers consider the possibility that the Chinese party-state might have had a hand in directly encouraging popular saving. Indeed, China represents one of the most compelling cases of the efficacy of aggressive savings promotion.

Under Maoist rule, Chinese households saved almost nothing. They had little money, it is true, but they also lacked safe, convenient banking facilities. In the three years following the Communist Revolution of 1949, the regime eliminated all public and private banks, transferring their assets to the central People’s Bank of China. The dissolved banks included the Republic of China’s fledgling postal savings bank, established in 1919. Although families under Maoism may have saved by hoarding goods and a little cash, they had little incentive to save in lieu of accessible institutions for small savings.

All this changed in the wake of the regime’s decision to reform and open the Chinese economy in 1978. Leaders recognized the pressing need to mobilize domestic savings to remedy capital shortages. One year later the state established the Agricultural Bank of China, the Bank of China, and the People’s Construction Bank of China. The creation of the Industrial and Commercial Bank of China in 1983 completed the formation of what today constitute the four big state-owned commercial banks.

The year 1986 ushered in the next phase, the relentless pursuit of small savers nationwide. The Agricultural Bank and the Industrial and Commercial Bank set up nearly 30,000 new branches that year. The Agricultural Bank alone doubled the number of its branches, reaching villagers who likely had never before had a savings account.

Institutions bear heavily on savings behavior. In 1986, savings deposits increased at a faster clip than at any time since the founding of the People’s Republic of China. It was not simply that branches opened and customers streamed in. Bank employees ran nationally coordinated campaigns to persuade the locals to entrust their savings to the new institutions. Including its joint savings projects with the authorities, associations, and cooperatives, in 1991 the Industrial and Commercial Bank claimed one million staff members engaged in “savings mobilization.”

Joining the big banks in 1986 was the new—or rather improved—Chinese postal savings system. For all the recent insistence on Chinese exceptionalism, officials methodically emulated the savings-promotion policies of Japan and other thriving Asian economies.

Once the regime committed itself to reviving postal savings, Chinese bureaucrats visited Japan’s Postal Savings Bureau and Central Council for Savings Promotion. Cooperative relationships between savings officials of the two nations developed. During the 1990s, Japan’s Ministry of Posts and Telecommunications assisted the Chinese in computerizing the postal savings system. Officials from the People’s Bank of China, moreover, actively participated in the Bank of Japan’s meetings for Asian central bankers, reporting on Chinese programs to boost savings deposits.

Postal savings became immensely popular among Chinese for much the same reasons we have seen elsewhere. In many rural and remote areas of China, it is one of the few institutions that serve small savers. The number of branches mushroomed from less than 2,500 in 1986 to 37,000 in 2009. Its popularity also rested on more than two decades of promotional campaigns by postal employees and the local authorities.

As a share of total deposits, postal savings appears small compared to deposits the four big state-owned commercial banks—only 8.1 percent in 2002. But of course we’re talking about the world’s largest country. The number of households with postal accounts that year came to a mind-boggling 104 million.

Chinese leaders today speak less openly about their efforts to promote saving. Instead, officials increasingly pledge to stimulate consumption as a vital prop of the Chinese economy. As in Singapore, the party-state recognizes that its continued legitimacy depends on improvements in the people’s material lives. In view of decreased demand from sluggish Western economies, the planners are also aware that domestic consumers may need to buy more if the Chinese economy is to continue high growth.

However, the Communist Party’s pronouncements on consumption have their tactical side. They aim to reassure American observers, many of whom take any pledge as evidence that China will soon embrace an American-style consumer society.

Unquestionably consumption is rising in China, yet the Asian giant will likely remain a high-saving society for many years to come. The consumption levels enjoyed by Westerners, Japanese, Koreans, and Singaporeans are well beyond the reach of hundreds of millions of Chinese. Consumption as a share of GDP stands at 35–36 percent, half that of the United States. Contrary to many media stories, China’s high growth relies overwhelmingly on investment, exports, and government consumption -- and relatively little on domestic consumption.

Finally, the regime has a powerful stake in promoting household saving for the foreseeable future. Chinese authorities learned a great deal from the Japanese and Singaporean models, in which the state manages and invests large pools of small savings. The Chinese government similarly captures the people’s savings at low cost from the state-owned banks and postal savings system. This capital finances companies and infrastructure at home. It also flows into the Singaporean-style sovereign wealth fund that China invests strategically in such things as U.S. Treasury securities and the exploitation of African minerals.

China, the newest savings superpower, now enjoys influence in international relations it could scarcely imagine three decades ago. When then-Treasury Secretary Henry Paulson blamed the China’s “superabundant savings” for causing a global credit bubble, the Chinese turned the tables just as the Japanese had done 20 years earlier. The United States, declared Premier Wen Jiabao, should be held most accountable for the global economic crisis. America had pursued an “unsustainable model of development characterized by prolonged low savings and high consumption,” the “blind pursuit of profit,” and “the failure of financial supervision.”

Make no mistake about it. Chinese leaders have few plans to jettison the policies of savings promotion that have served them so well.