A Study On Chinese Household Savings And Debt

Against the background of global low interest rates,observing the macro fact of "High Savings" and "High Debt" in China,this paper takes interest rate and house price as the intermediations,studies the factors and mechanism of Chinese household savings and debt,and clarifies the logic relationship between household savings,interest rate,house price and household debt.This paper constructs a three-period overlapping generation model(OLG)taking the households as the research object.This paper considers the Chinese household characters and explains important factors affecting household savings theoretically,including demographic characteristics of households,income inequality and intergenerational property inheritance which determine long-term interest rates by influencing household savings,more savings increase capital supply and lead to lower interest rate.Interest rate and high house price serve the bridge between the household savings and debt.Low interest rates and high house price lead to high household debt.From the perspective of investment cost and income,households determine the size of debt under the balance of house price growth rate and loan interest rates.This paper puts forward five hypotheses based on the theoretical model.This paper justifies the logic relationship between high savings and high debt in Chinese households,and explains macro problems based on micro facts.According to the theoretical model,this paper applies the CFPS data,provincial panel data and tests the relationship between household savings,interest rate,house price and household debt in China empirically.The empirical study results show that:(1)Chinese household demographic characteristics,income inequality and intergenerational help are important factors affecting household savings,the influence of child dependency ratio on household savings is mainly "life cycle effect ",and the influence of elderly dependency ratio on household savings is mainly "preventive savings effect ".Household income inequality and parents’ intergenerational help to their children have increased household savings;(2)More savings increase the funds supply and decrease long-term interest rates.Long-term variables of demographic characteristics and income inequality have reduced long-term interest rates by influencing household savings;(3)Household property purchasing has dual attributes of consumption and investment,low interest rates and high price of property increase household debt.In terms of the cost and benefit of house investment,the higher rate of house price growth,the larger household debt accumulation.Based on theroretical analysis and empirical study,the paper argued that insufficient effective demand and asset bubble risks will be led by high household savings and high debt.At the same time,with global low interest rates and rising uncertainty,it is difficult for China to remain independent monetary policy.Therefore,macro-policy should improve the level of public services such as education and care for elderly people for the family worries;macro sector should guide household to develop rational household planning and adjust income distribution to improve the quality of household consumption,tap domestic demand and smooth the domestic cycle;the government should establish and improve a long-term mechanism to regulate housing price,the central bank maintains conventional monetary policy space to prevent bubble economy and economic crisis prudently.