On January 23, 2015, the Survey and Research Center for China Household Finance (hereafter referred to as “the Center”) released the “Quarterly Report on Chengdu Households” in Chengdu. The Center’s personnel attended the press conference and gave a report on the condition of Chengdu households’ wealth.
Prices Are Expected to Increase, Housing Prices Are Expected to Decrease, and the Stock Market Is Expected to Take a Turn for the Better
According to the report, prices for Chengdu households were expected to rise from the first quarter to the fourth quarter. Of these, household prices have been expected “to rise just a little bit” from 42.98% in the first quarter and 50.96% in the fourth quarter.
Prices achieved the opposite of what was expected as housing prices in Chengdu were expected to sink lower during the first three quarters. Among these was the thought that housing prices would “go down just a little bit” from 31.38% to 16.46%.
Looking at the stock market, Chengdu households expected things to take a turn from pessimism to optimism in the first three quarters, and more households thought the stock would rise. Especially during the third quarter, 41.6% of Chengdu households thought the stock market would rise.
Total Assets Decrease First and Rise Later and Household Asset Structure is Adjusted
In the second, third, and fourth quarters, Chengdu households’ total assets and those of other provinces’ capital cities all over the nation had a tendency to have identical trends. Among those, the amount of total household assets remained “practically constant” from 62.9% in the second quarter to 65.43% in the fourth quarter, accounting for much more than those households undergoing total asset changes.
Interestingly, while the total assets of Chengdu households have not recently undergone a major change, there was been an obvious adjustment in the composition of the assets. Like the third quarter, Chengdu residents held a larger number of riskier assets and less non-risky assets, industrial assets, housing and other non-financial assets.
Even so, Chengdu households’ financial assets are still relatively very low, only accounting for 8.58% of the total assets; among them, non-risky assets are as high as 76.99%; and risky assets and loaned funds are 13.19% and 9.82%, respectively. Additionally, shares comprised 62.47% of risky assets. Of non-financial assets, real estate assets make up 58.06%; compared to other areas and provinces nationwide, industrial assets and other non-financial assets will be more or less identical.
Comprehensive Borrowing and the New Requirements for Borrowing Money Include the Condition of “First Subtract, and then Add”; the Post-Third Quarter Requirement of “Success Is Not Satisfactory” Was for the Highest Proportion of Households
Total and new borrowing and lending appears to “First Subtract, Then Add”; the households that have “Not satisfied at all” borrowing and lending requirements account for the highest proportion.
The report shows that the four quarters requirements’ for Chengdu households to borrow money as a part of total assets and new requirements for borrowing capital were the lowest during the second quarter. After those two quarters, the fourth quarter and the first quarter were basically equal.
It is worth noting that credit demands of the last three quarters which were “not satisfied a all” have the highest proportion. The number is 38.2%, 43.68%, and 57.19%, respectively, rising from the time being.
Increased Borrowing of Money Depends on Civil Borrowing and Is Used Primarily for Housing and Business Operations
The report points out that all over the nation the act of households borrowing money is a relatively common occurrence. Chengdu is also no exception as 34.1% of Chengdu households said that they would depend on the civil borrowing. Of that, 16.9% use bank-regulated loans.
Additionally, Chengdu households use borrowed capital primarily for housing and business operation. High-income households participating in civil lending use loans for three main reasons: housing, business operations, and vehicles at 23.3%, 7.8%, and 4.7%, respectively. Low-income households participating in civil lending use borrowed funds primarily for housing, education, and business operations at 28.2%, 8.1%, and 7.7%, respectively.
High-Income Households Participate the Most Actively in Civil Lending; Low-Income Households Have the Most Borrowed Capital
The report also shows that high-income households have the highest level of participation in civil lending. The higher the salary, the higher the level of participation in civil lending; 48.4% of high-income households participate in civil lending while 25.3% participate in civil borrowing. Low-income households have the highest rate of participation in civil borrowing and the lowest number of bank-related loans. The data shows that 8.4% of households depend on bank loans while 39.5% of households rely on civil lending.
The Head of Household’s Age and Level of Education Have a Striking Impact on Whether the Household Participates in Lending and Borrowing Money
For Chengdu households, the head of household’s age and level of education can have a striking impact on the whether the household participates in civil borrowing and lending. Regarding households that depend on banks, the majority have heads of household that are between the ages of 31 – 45, with data showing that 24.5% of all households belong to this category. Most borrowing households have a head of household who is between 46 – 60 years of age, comprising 42.7% of that category.
Simultaneously, the higher the head of household’s level of education, the easier it is to borrow money because banks are more likely to give a loan. As a result, they participate in civil lending at a lower rate. Heads of household with a level of education that ranges between “lower than middle school” and “higher than a bachelor’s degree” receive loans from banks at percentages ranging from 11.0% to 31.0%; rates of participation in civil lending range from 39.5% to 24.7%.
Additionally, households where the head is a member of the Party have a high level of receiving bank loans and a low rate of participation in civil borrowing.
Civil Lending to Friends and Coworkers Is on the Rise and Makes Lending Very Accessible, but It Also Requires that One Be Diligent about Risk
Finally, the report shows that 50.6% of Chengdu households borrow money from their friends and coworkers and 25.4% of households lend money to siblings. The methods for borrowing money are very flexible because of “feelings of embarrassment”; 85.6% of borrowing always involves some sort of oral contract, 98.6% do not have a guarantee, 84.9% do not have an allotted time for repayment; 97.6% do not have interest, and 99.1% do not have a pledge of any kind. We would like to remind the reader that these kinds of situations require that individual lenders be especially vigilant about the risk level of the people they lend to.