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Assessing Macro-Financial Risks of Household Debt in China

Author

Listed:
  • Mr. Fei Han
  • Ms. Emilia M Jurzyk
  • Wei Guo
  • Yun He
  • Ms. Nadia Rendak

Abstract

High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household indebtedness could boost consumption in the short term, while reducing it in the medium-to-long term. By stress testing households’ debt repayment capacity, we find that low-income households are most vulnerable to adverse income shocks which could lead to signficant defaults. Containing these risks would call for a strengthening of systemic risk assessment and macroprudential policies of the household sector. Other policies include improving the credit registry system and establishing a well-functioning personal insolvency framework.

Suggested Citation

  • Mr. Fei Han & Ms. Emilia M Jurzyk & Wei Guo & Yun He & Ms. Nadia Rendak, 2019. "Assessing Macro-Financial Risks of Household Debt in China," IMF Working Papers 2019/258, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/258
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    References listed on IDEAS

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    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. Moritz Schularick & Alan Taylor & Oscar Jorda, 2016. "The Great Mortgaging," 2016 Meeting Papers 185, Society for Economic Dynamics.
    4. Ding Ding & Xiaoyu Huang & Tao Jin & Mr. Waikei R Lam, 2017. "Assessing China’s Residential Real Estate Market," IMF Working Papers 2017/248, International Monetary Fund.
    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.
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    Cited by:

    1. Robert Huterski & Agnieszka Anna Huterska & Justyna Łapińska & Ewa Zdunek-Rosa, 2020. "The problem of savings exclusion and gross savings in the new European Union member states," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(3), pages 2470-2480, March.
    2. Lukáš Fiala, 2021. "Modelling of mortgage debt´s determinants: the case of the Czech Republic," FFA Working Papers 4.002, Prague University of Economics and Business, revised 15 Jan 2022.
    3. Long, Teng & Feng, Liyu, 2024. "Aging, low fertility and household debt risk," International Review of Economics & Finance, Elsevier, vol. 95(C).
    4. Beer, Sonja, 2022. "Chinas Immobiliensektor: Wie groß ist die Krise?," IW-Reports 19/2022, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
    5. Funke, Michael & Li, Xiang & Zhong, Doudou, 2023. "Household indebtedness, financial frictions and the transmission of monetary policy to consumption: Evidence from China," Emerging Markets Review, Elsevier, vol. 55(C).
    6. Jan Klacso, 2024. "Estimating Macro DSTI for Selected EU Countries," Working and Discussion Papers WP 3/2024, Research Department, National Bank of Slovakia.

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