Assessing Macro-Financial Risks of Household Debt in China

26 Pages Posted: 22 Jan 2020

See all articles by Fei Han

Fei Han

International Monetary Fund (IMF)

Emilia Jurzik

International Monetary Fund (IMF)

Wei Guo

International Monetary Fund (IMF)

Yun He

International Monetary Fund (IMF)

Nadia Rendak

International Monetary Fund (IMF)

Date Written: November 2019

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.

Keywords: Financial crises, Fiscal sector, Real sector, Demographic indicators, National accounts, Household indebtedness, macro-financial risks, houshold survey, WP, consumption growth, household debt, LTV, indebtedness, DTI

JEL Classification: D10, D14, E21, G21, E01, E52, E63, G2

Suggested Citation

Han, Fei and Jurzik, Emilia and Guo, Wei and He, Yun and Rendak, Nadia, Assessing Macro-Financial Risks of Household Debt in China (November 2019). IMF Working Paper No. 19/258. Available at SSRN: https://ssrn.com/abstract=3523131

Fei Han (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Emilia Jurzik

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Wei Guo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Yun He

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nadia Rendak

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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