The credit risk of Chinese households: A micro-level assessment

Michael Funke; Rongrong Sun; Linxu Zhu

doi:10.1111/1468-0106.12367

The credit risk of Chinese households: A micro-level assessment

Michael Funke, Rongrong Sun (Lead / Corresponding author), Linxu Zhu

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2 Citations (Scopus)

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Abstract

Using three waves of the China Household Finance Survey (CHFS), we present basic facts about indebtedness and financial fragility of households in China between 2011 and 2015. We show how the total debt and mortgage debt (LTV) are distributed among different income groups, and how they change over time. Our stress tests suggest that Chinese households in higher quintiles, despite the huge increase in household indebtedness, are not vulnerable to declining incomes or falling house prices, while the low-income households face high vulnerability and struggle to meet their debt commitments. However, the participation rate of low-income households in the debt market is low, and household debt is mainly held by wealthier and higher-income households. Our results suggest that the systematic default risk of Chinese household debt is moderate.

Original language	English
Pages (from-to)	254-276
Number of pages	23
Journal	Pacific Economic Review
Volume	27
Issue number	3
Early online date	3 Aug 2021
DOIs	https://doi.org/10.1111/1468-0106.12367
Publication status	Published - Aug 2022

Keywords

China
financial stability
household debt
household financial vulnerability

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10.1111/1468-0106.12367

Author accepted manuscript
This is the peer reviewed version of the following article: Funke, M., Sun, R., & Zhu, L. (2021). The credit risk of Chinese households: A micro-level assessment. Pacific Economic Review, which has been published in final form at https://doi.org/10.1111/1468-0106.12367. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Accepted author manuscript, 971 KB

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The credit risk of Chinese households: A micro-level assessment

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