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China’s Rising Household Debt: A New Debt Trap?

Author

Listed:
  • Sarah Chan

    (East Asian Institute, National University of Singapore)

Abstract

Household debt in China has risen rapidly in recent years, mostly driven by mortgages but also by ongoing financial deepening and liberalisation which facilitate economic rebalancing towards more consumption. Although the risks to financial stability do not seem large at the time of writing, the sharp rise in household debt has raised some concerns, as high household borrowing could increase macro-financial risks, particularly given the US-China trade tensions and the ongoing coronavirus pandemic that has resulted in weaker employment and export market. Rising household debt will add to medium- to long-term challenges for China’s domestic consumption and the financial sector. The authorities have so far implemented measures to lessen the risk of a sharp housing correction in the short-run.

Suggested Citation

  • Sarah Chan, 2020. "China’s Rising Household Debt: A New Debt Trap?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 567-578, December.
    • Handle: RePEc:nwe:eajour:y:2020:i:4:p:567-578
    as

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    File URL: https://www.unwe.bg/doi/eajournal/2020.4/EA.2020.4.04.pdf
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    References listed on IDEAS

    as
    1. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2016. "The great mortgaging: housing finance, crises and business cycles," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 31(85), pages 107-152.
    2. Nakajima, Jouchi, 2020. "The role of household debt heterogeneity on consumption: Evidence from Japanese household data," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 186-197.
    3. Atif Mian & Kamalesh Rao & Amir Sufi, 2013. "Household Balance Sheets, Consumption, and the Economic Slump," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1687-1726.
    4. Moritz Schularick & Alan Taylor & Oscar Jorda, 2016. "The Great Mortgaging," 2016 Meeting Papers 185, Society for Economic Dynamics.
    5. Marco Jacopo Lombardi & Madhusudan Mohanty & Ilhyock Shim, 2017. "The real effects of household debt in the short and long run," BIS Working Papers 607, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    credit; China; Household debt; financial stability;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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