Abstract: This paper studies the impact of intergenerational income mobility on household saving behaviour in urban China. We develop a simple static model and demonstrate that altruistic parents will save more when intergenerational elasticity of income (IGE) is smaller. Comparative static analysis shows that the magnitude of IGE on household saving is amplified by liquidity constraint, as well as other interesting theoretical predictions.Empirical results using CHIPS data are consistent with our model's various predictions. Our estimate indicates that a 1% decrease in IGE is associated with a 0.126%-0.196% increase in household saving rate. As a result, the decreasing IGE in our sample period will lead to a 2.6 - 3.4 percentage point increase in household saving rate, which accounts for 14%-19% of the total increase of Chinese urban household saving rate.