The average working class Chinese family plans to borrow US$40,000 but gets only US$20,000, survey finds
Average working class household targets US$40,000 loan, according to study
Chinese households are less indebted than those in the United States and Japan, but financial risk-taking is growing as more wage earners borrow money, according to a nationwide survey.
The results of the survey of more than 40,000 households from July to September were released on Tuesday and shed light on the rapid growth of consumer credit in China, an issue that could shape the country’s economic future and have an impact on the rebalancing of the global economy.
Among the findings, the ratio of household debt to gross domestic product had ballooned to 52.6 per cent at the end of September – up from 23.7 per cent at the end of 2009.
While the share of household debt in the country’s overall debt is still small – and below the household debt to GDP ratio of 60 per cent seen in wealthier countries such as the US and Japan – it poses a risk that China cannot afford to neglect, according to the researchers.
The survey was conducted by the Survey and Research Centre for China Household Finance at the Southwestern University of Finance and Economics in Chengdu, and consumer credit firm China Top Credit.
It also looked at the consumer credit intentions of China’s working class – who make up 26 per cent of the population – and found they planned to borrow an average of 265,000 yuan (US$40,000) per household, 225,000 yuan of which would be through a mortgage.
But the average amount actually borrowed by these households was 125,000 yuan at the end of September – 86.3 per cent of which took the form of a mortgage, the survey found.
Their debt structure matched their assets, with homes accounting for 78.2 per cent of working class families’ assets, according to the survey.
These households – defined as those with at least one member being a stable wage earner – borrowed money from banks as well as relatives.
Some 70 per cent of these wage earners, many of whom were born in the 1980s and 1990s, had an annual salary of more than 30,000 yuan, according to the survey. Ten per cent of them earned more than 100,000 yuan per year.
The average per capita disposable income in China was 23,821 yuan in 2016 – up 8.4 per cent from a year earlier, according to the National Bureau of Statistics.
Home-buying still accounts for the majority of family debt in China, but consumer credit is growing at a faster pace than mortgages, and that has seen huge growth in the microlending business, which has recently come under the scrutiny of financial regulators.
From 2013 to 2017, consumer credit among working class families grew by 25.7 per cent annually, compared to 20.2 per cent growth in mortgages.
However, there are still plenty of Chinese who want to borrow money but cannot.
“A large number of Chinese without credit records have no access to financial services. Even among the working class who have credit cards, that credit gap still exists,” Wei Kun, a board secretary from China Top Credit, said.
The survey also found that the working class preferred to borrow money from online financial service providers than traditional banks, with an average loan of 4,000 yuan, and very few said they delayed repayments.
More than 65 per cent of Chinese families with loans borrowed less than twice the amount of their annual income, according to the researchers.