The high level of investment has been almost entirely financed through domestic savings. The saving ratio in China amounts to around 45 per cent of GDP, which is a much higher level than in most other countries. According to estimates, Chinese households save one third of their incomes. One reason for the high level of saving is the lack of a social safety net and a general pension system. As a consequence of the high level of saving, private consumption is relatively low. China has had relatively strong growth in exports; in the past five years alone exports have trebled. 4 The country is currently a nation as open as, for instance, France and Italy, measured in the percentage of foreign trade in GDP and considerably more "open" than the United States. China has come to be called “the factory of the world” as an increasing number of foreign companies have chosen to purchase goods and locate parts of their production there. For instance, China manufactures more than two thirds of all photocopiers, microwave ovens and DVD players, and 40 per cent of all of the world’s computers. 5 However, a large part of the input goods for these products are imported from neighbouring countries, but the prevalent picture that China can only compete with lowcost products is slowly changing. In recent years China has gone from specialisation in simple, labourintensive low-cost products to also producing more technically-advanced and internationallycompetitive products.
Given this way of thinking, our Inflation Reports contain a special section where we discuss alternative scenarios for inflation and the real economy and the probability that these will materialise. It is the forecast of inflation and the real economy taking into account the risks of alternative scenarios that forms the basis of our monetary policy decisions. Of course, it is not appropriate for a risk analysis to take into account all imaginable risks; not even all those that would have dramatic consequences if they were to materialise. For instance, it is not reasonable, in my opinion, to allow monetary policy decisions to be governed by the risk of global imbalances, as we are unable to affect this development through our own monetary policy. 3 On the other hand, I consider that it is important to always take into account risks that arise from the monetary policy conducted, even if it is sometimes difficult to quantify these risks and calculate their consequences. One problem faced by many central banks with inflation targets, and which relates to this, is the risk of unfavourable developments in property prices and household indebtedness as a result of a long period of expansionary monetary policy. Sweden is no exception here. Both cyclical and structural factors justify the growth rate in household debts and property prices being high over a period of time in Sweden and there is thus reason to take this into account in the normal analysis and forecasting work.