Chinese Household Finance Survey Research Articles

Financial literacy, entrepreneurial activity and entrepreneurial motivation

This paper investigates the impact of entrepreneurial motivation on entrepreneurial activity using data from the Chinese Household Finance Survey. The paper finds that both opportunity entrepreneurial motivation and survival entrepreneurial motivation can significantly promote entrepreneurial activity. Survival entrepreneurial motivation has a stronger effect. Further analysis reveals that the higher the level of financial literacy, the more obvious the promotion effect of entrepreneurial motivation on entrepreneurial activity. Financial literacy plays a role as a moderating variable.

The Impact of Governments’ Digital Economy Procurement on Rural Household Entrepreneurship

ABSTRACT Intangible digital technologies have advanced significantly over the past few decades. We examine the effects of government digital economy procurement programs on rural household entrepreneurship using data from the Chinese Household Finance Survey, China Grassroots Governance Survey, and Chinese government procurement data from 2015 to 2019. We find that the likelihood of rural household entrepreneurship is greatly increased by the government acquisition of products in the digital economy. Our mechanism analysis shows that government digital procurement could have an impact on rural household entrepreneurship by easing credit restrictions, encouraging the growth of distinctive industries, and improving government information disclosures. Furthermore, the effects of government procurement in the digital economy are particularly noticeable in counties characterized by e-commerce and industry integration. The paper offers insightful policy recommendations for the use of digital initiatives to support rural economic development in emerging economies.

House purchasing intention and household participation in the financial market: evidence from Chinese households

This paper uses the micro-cross-sectional data from the Chinese Household Finance Survey in 2017 to systematically investigate the influence of house purchasing intention on household participation in the financial market by adopting probit, tobit and bootstrap methods. First, house purchasing intention had a significant positive impact on household participation in the financial market. Second, family risk preference played a significant mediating effect in the relation stated above. The results of the paper revealed that the impact of housing market prosperity on participation in the financial market was not only through the stock of real estate in the housing market but also through house purchasing intention.

Will Inflation Expectations Affect Residents’ Financial Exclusion?

Based on the data of Chinese Household Finance Survey (CHFS) in 2015, this paper uses instrumental variable method to conduct empirical research on the relationship between residents’ inflation expectation and financial exclusion. The results show that individual inflation expectation can significantly improve the probability of residents’ financial exclusion. Individual inflation expectation has a significant positive impact on the exclusion of residential investment products and credit products. Furthermore, through the interaction term, it is found that only in the group with high inflation expectation, economic information can significantly reduce residents’ financial exclusion. In addition, inflation expectation has obvious heterogeneity in the exclusion of different financial products. In addition, individual inflation expectations also have a significant impact on the number of residents’ financial products, rising inflation expectations raised the residents in the low risk allocation on financial products, to reduce the risk allocation of the financial product, at the same time, individual inflation expectations of residents, there is no significant difference among the production and business operation loans accounted for, But it has significantly increased the share of consumer loans.

Age structure of the population and the choice of household financial assets

China is undergoing changes in its demographic structure, and the burden of raising children and caring for the elderly is negatively affecting the welfare of Chinese families. Optimising the financial structure of households may be an effective solution. Using data from the 2017 Chinese Household Finance Survey, in this study, we empirically analyse how the age structure of the population affects a household’s finances by applying probit and tobit models. It was found that an increase in the proportion of infants in a family has a crowding-out effect on its investment in risky and deposit assets, and an increase in the proportion of elderly family members encourages the replacement of risky assets with savings. Further mechanism tests showed that the presence of infants affects the choice of financial assets by crowding a family’s labour or leisure time, increasing expenditures, and changing a family’s cash demand, while the presence of the elderly changes household finances because a family’s risk preferences are altered by the weakened cognitive abilities of the elderly. Finally, in this article, we advance some policy suggestions, such as regulating capital market management, increasing birth subsidies, and improving the financial literacy of the elderly, to ensure future pension security.

Life course and cohort effects on Chinese parents' investments in their children

Background: How parents’ age at the birth of their children (age at parity) affects their investments in the children has not been explored previously. Objective: We examine the effect of parents’ age at parity on the investments in their children by disentangling the overall effect into life-course effect and cohort effect. Methods: Using the 2017 wave of the Chinese Household Finance Survey, we conduct a cross-sectional regression analysis to separately estimate the life-course effect and the cohort effect. Results: We find a positive relationship between parents’ age at parity and investments in their children and a negative relationship between parents’ current age and investments. We also find a negative relationship between investments and parents' age interacted with their age at parity. Conclusions: Parents who gave birth at an older age and those from a younger cohort on average invest more in their children, both financially and in time. Older parents spending more on their children suggests that financial constraints may be another channel, in addition to a biological one, through which having a child at a later age limits total fertility. Contribution: Delay in age at parity and increase in parental investment in children are two prominent social phenomena in many parts of the world. The positive link we find between them suggests that these phenomena, which are often cited as important contributors to the decline in the total fertility rate in many nations, may be reinforcing each other.

Consumption- and productivity-adjusted dependency ratio with household structure heterogeneity in China

Abstract Using the 2011 Chinese Household Finance Survey data, with a regression model, we construct a new dependency ratio measure by taking into account the consumption needs of the young and elderly people, and the productivity of middle-aged people. We find that (i) the consumption- and productivity-adjusted dependency ratio are consistently lower than the one that is traditionally defined; (ii) the differences between traditional dependency ratio and the consumption- and productivity-adjusted dependency ratio grow larger in more distant future; and (iii) household composition significantly affect household consumption and medical expenditures. The relatively younger elderly living with their offspring reduces the consumption of the young members. The elderly living alone shows higher consumption and medical expenditures compared to their counterparts who live with their offspring. Contrary to previous findings, the medical cost does not increase with age, but it exhibits an inverted U-shape relationship with age. The age group between 56 and 65 experiences sharpest increases in medical cost in China. We also simulate the impacts of smaller households, urbanization, and economic growth on consumption for China.

Risk tolerance and household wealth--Evidence from Chinese households

This paper investigates the influence of wealth accumulation on household risk tolerance. We analyze the influence of several household characteristics on risk tolerance using data from the Chinese Household Finance Survey. We further explore the effects of age, personal experience with famine, level of regional trust and income threshold on this relationship. The empirical results indicate the following. First, the accumulation of household wealth can significantly increase household risk tolerance. Second, this relationship weakens with age, and for elderly people, experience with famine offsets this enhancing effect. Third, higher levels of regional trust help increase a household’s ability to withstand risks. Fourth, the enhancing effect of income level on household risk tolerance is more significant for high-income families than for low- and middle-income families. Finally, the level of social security does not have a significant impact on a household’s risk tolerance. This paper provides a clear understanding of the determinants of risk tolerance and the effects on household risk tolerance.

The Impact of Home Equity and Housing Provident Fund on the Household’s Stock Investment

Based on the (CHFS) data of Chinese household finance survey, this paper divides the housing wealth of residents into housing net value and housing loan. On this basis, adding the virtual variable of whether to own provident fund or not, Probit model and Tobit model are used to investigate the change of housing net value and the influence of owning housing provident fund on the participation of family stock market. The empirical results show that the increase of net housing value will significantly increase the proportion of households participating in the stock market and the shareholding rate. Families with provident fund accounts are also more willing to join the stock market than those without provident fund accounts, and their shareholdings are higher.

The Influence of Social Capital on Farm Household’s Borrowing Behavior in Rural China

This paper evaluates whether social capital affects the ability of farm households to obtain formal and informal loans. We test for the impact of two measures of social capital. The first measure, kinship, captures the traditional aspects of bonding social capital in rural areas that might affect the probability of getting informal loans. As the economic reforms in China have changed the traditional rural way of life and weakened the role of kinship, more mobile farmers are likely to develop a different kind of social capital also based in the Chinese tradition but not focused exclusively on kin. This friendship social capital is hypothesized to affect farmers’ ability to get both formal and informal loans. We use the Chinese Household Finance Survey data from 2013 and estimate the probability of obtaining credit, while also accounting for the reverse causality. In addition, we use the Heckman selection model to establish how social capital affects not only the probability of getting loans but also the size of the loan. Empirical results suggest that social capital affects borrowing by farm households. In particular, the friendship social capital has a positive effect on farm household’s ability to get formal loans, and has a substitution effect on informal borrowing, while kinship has a positive effect on farm households’ ability to get informal loans. Friendship and kinship are positively associated with the amount of a farm household’s formal and informal loans, respectively.

The Impacts of Financial Literacy on Chinese Financially Excluded Households’ Retirement Planning Behaviors

In this paper, I am using the data from the 2013 Chinese Household Finance Survey (CHFS) to explore the impacts of financial literacy on Chinese households’ retirement planning and the demand for commercial insurances, especially among the financial excluded/vulnerable subpopulations (rural, illiterate and migrant), in China. I find improving financial literacy could help Chinese households be more prepared for retirement. The households with higher objective financial literacy score and paid more attention to financial information are more likely to have retirement plan, and they are also more likely to have diversified ways to support financial life after retirement. In addition, annual household disposable income, family net assets, gender, age, age squared, family size, number of children, health condition etc. are found to be significant factors to explain how Chinese households choose different ways to support their lives after retirement. Rural and illiterate households are more dependent on saving and child support after retirement, while urban and literate households are more likely to rely on social pension plan and retirement pay after retirement. Rural residents and migrants are more vulnerable, concerning the social pension system coverage. Trustiness of commercial pension plan is the important determinant whether Chinese households are willing to buy commercial insurance and commercial pension plans, and which can be improved by means of increasing financial knowledge and paying more attention to financial information.

Financial inclusion and poverty: The role of relative income

Using the Chinese Household Finance Survey data set, the study shows that concern with relative income significantly stimulates poor households to apply for bank credit. The effect of income comparisons on credit applications can be explained by either a “keeping up with the Joneses” effect, in which the poor seek financing for costly consumption to emulate the wealthy's consumption style and thus suffer persistent poverty, or else a “tunnel” effect, in which the poor are inspired by the wealthy's economic success and enlightened to use credit for investment. Although this study provides no empirical evidence of a “keeping up” effect, it reveals that credit applicants invest significantly more in human capital than non-applicants, and it demonstrates that the “tunnel” effect is the primary incentive for relatively poor households to participate in the credit market. Poor households are capable of using finance to escape from poverty.

Advance or face

PurposeIn accordance with the traditional ranking of “scholar, farmer, artisan and merchant” in China, entrepreneurs are characterized as having lower social status, and are driven by face consciousness to engage in conspicuous consumption. Education is not only a human capital investment but also a conspicuous consumption good. This study aims to investigate how entrepreneurial households manage their education expenditure differently from non-entrepreneurial households and what the underlying mechanism is.Design/methodology/approachUsing Chinese Household Finance Survey 2011 data, this study empirically examines the education expenditure differentials between entrepreneurial and non-entrepreneurial households. Regression analyses on matched samples are carried out and the results are quite robust across different model specifications.FindingsOn the basis of the empirical analysis, this study finds that entrepreneurial households annually spend 19.30 per cent more on education than non-entrepreneurial households. The empirical results provide no evidence that education generates a greater increase in income for entrepreneurial households than for their non-entrepreneurial counterparts, which indicates that the education expenditure differentials do not result from different income returns to education. The findings show that education is a conspicuous good and the gap in education expenditure is partially attributable to different demands for the conspicuous consumption, which results from different face consciousness between the two kinds of households.Originality/valueThe results of this study reveal the significance and economic consequences of face consciousness for entrepreneurial households from the perspective of education.

Peer Effects in Consumption Among Chinese Rural Households

ABSTRACTThis article attempts to identify peer effects in household consumption in rural China using the Chinese Household Finance Survey (CHFS) 2011 data. In addition to the selection effect, reflection problem and correlated effect, we address the actual peer problem via the matching method in identifying the peer effect. It is found that as peer household’s consumption expenditure increases by 1%, the household’s consumption would increase by 0.24%. It is also found that richer households are more susceptible to peer pressure in consumption decisions. Finally, household is more sensitive to changes in the consumption of poorer peers, relative to their richer peers.

Housing ownership and housing wealth: new evidence in transitional China

Ever since housing was transformed from the most important welfare benefit to the most valuable form of private property through radical housing reform in 1998, housing allocation mechanisms in China have been characterized by the coexistence of market logic and socialist legacy. Thus, the Chinese housing system exhibits a transitional nature as the country moves away from a socialist housing system towards a privatized housing system. Using the 2011 Chinese Household Finance Survey, we not only examine these changes in private ownership of housing, but also give an updated evaluation of the privatization process with new empirical evidence. We develop a conceptual framework and an empirical analysis to shed light on distinct housing inequality patterns in transitional urban China. Our results show that both socioeconomic characteristics and socialist institutions contribute to housing inequality, but they follow different paths in the reform and have different impacts on housing inequality.

Agricultural Subsidies and Rural Family Entrepreneurship—Empirical Analysis Based on Chinese Microdata

Using the data of Chinese household finance survey in 2011, this paper has used the binary regression model of discrete variables to examine the influence of agricultural subsidy policy on rural family entrepreneurial behaviors. Empirical research shows that agricultural subsidies significantly lower the probability of the rural family entrepreneurial behaviors. On average, every 1 per cent increase in agricultural subsidies would reduce the probability of rural family entrepreneurship by 15.6 percentage points. At the same time, the influence of agricultural subsidies on family entrepreneurial probability is heterogeneity: agricultural subsidies have significantly reduced the probability of rural family entrepreneurship in low-social network groups and non-main producing areas, but have not significantly reduced the probability of rural family entrepreneurship in high-social network groups and major grain-producing areas. Further study found that agricultural subsidies affect the transmission mechanism of rural family entrepreneurial probability: agricultural subsidies—raising agricultural income and reducing the probability of entrepreneurship. Finally, this paper puts forward that it should give full play to comparative advantage and implement regional differentiation subsidy strategy; we will vigorously develop inclusive finance to improve the rural credit environment.

Impacts of Financial Literacy on Loan Demand of Financially Excluded Households in China

Government leaders around the world are designing national strategies to improve financial inclusion for populations traditionally excluded from the financial markets. Financial literacy is a key tool being used to bring economically vulnerable populations into the financial mainstream. We use data from the 2013 Chinese Household Finance Survey (CHFS) to investigate the impacts of various dimensions of financial literacy on the demand for bank and non-bank loans among rural, illiterate, and migrant populations in China. The findings show that those most vulnerable groups may be less likely to benefit from financial literacy, especially when it comes to usage of formal bank loans. Moreover, other factors such as those related to social networks and infrastructure may matter more than financial literacy. The findings suggest that barriers to access likely need to be overcome before financial literacy can be truly effective. Interestingly, results varied across measures of financial literacy and financial inclusion. Researchers are encouraged to re-examine previous definitions and measures of financial literacy and inclusion and to develop a better understanding of the relationship between the two dimensions. The current study provides important insights for policy makers and international organizations designing national strategies to improve financial inclusion via financial literacy, especially for populations that have been traditionally excluded.

Infrastructure, Urbanization, and the Financial Inclusion of Chinese Households

Financial inclusion plays an important role in giving households greater access to borrowing opportunities, which in turn can be used to improve human capital accumulation, socioeconomic status, and long-run economic development. One way to enhance households’ access to and usage of the financial system, especially the formal banking system, is to ensure that an adequate infrastructure exists within their community. This study uses data from the 2013 Chinese Household Finance Survey to investigate how the infrastructure affects the usage of formal bank loans for both urban and rural households in the People’s Republic of China (PRC). The analysis is extended to investigate the impacts of the infrastructure on non-bank loans. The results suggest that the infrastructure, in a variety of forms (e.g., physical, financial, technological, social, and informational), is significantly associated with the loan demand—most notably for urban households using formal bank loans. Further, those living in more urbanized areas and megacities are less likely to demand bank and non-bank loans even after controlling for other factors, suggesting that there may be an “urbanization effect” that is dampening credit access and usage. The potential endogeneity between the infrastructure and the loan demand is taken into consideration. The results show that decisions related to the loan demand and infrastructure mostly appear to be made independently. The findings from this research have important implications for the PRC and other countries working on national strategies aimed at improving financial inclusion, especially the expansion of bank credit in rapidly growing urbanized areas, where the infrastructure may be reaching capacity.

The impact of China's housing provident fund on homeownership, housing consumption and housing investment

In the absence of well-functioning credit and mortgage markets, the Chinese government has implemented several reforms to encourage home purchases. Among the most prominent of these is the Housing Provident Fund, which requires employers and employee contributions to a pool which is later used to make mortgage loans to participants. We use the 2011 Chinese Household Finance Survey and a smaller survey from Jinan, Shandong province to examine the extent to which the Fund encourages the acquisition of owner-occupied housing. We find that fund participants are more likely to be owner-occupiers, although they also purchase smaller properties than they otherwise might have, due to the down payment restrictions on mortgage loans. The HPF also encourages housing investment, but to a lesser extent.

An Evaluation of Poverty Prevalence in China: New Evidence from Four Recent Surveys

Knowledge of actual poverty prevalence is important for any society concerned with improving public welfare and reducing poverty. In this paper, we calculate and compare the poverty incidence rate in China using four nationally representative surveys: the China Family Panel Studies (CFPS) of 2010, the Chinese General Social Survey (CGSS) of 2010, the Chinese Household Finance Survey (CHFS) of 2011, and the Chinese Household Income Project (CHIP) of 2007. Using both international and official domestic poverty standards, we show that poverty prevalence at the national, rural, and urban levels based on the CFPS, CGSS, and the CHFS are much higher than the official estimation and those based on the CHIP. The study highlights the importance of using independent datasets to validate official statistics of public and policy concern in contemporary China.