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2016/8/19

Is the Data of China's Average Household Assets of RMB 920 Thousand Reliable?

Is the Data of China's Average Household Assets of RMB 920 Thousand Reliable?

13:45, December 3, 2015  Author: Li Feng

China's average household assets of about RMB 920 thousand in 2015 does not mean that the majority of people have reached this level. The average number is just the numerical value obtained based on equal distribution and cannot represent the middle level, let alone the level of the overwhelming majority. Statistics show that the median household assets are only RMB 330 thousand. If the total assets of your family are more than this figure, then it is likely that you have ranked in the top 50% in China.

"I'm sorry that I have held you guys back." "My level is far lower than yours." Recently, the Survey and Research Center for China Household Finance has shared a set of the latest survey and research data in 2015 on a forum in Chengdu: in 2015, China's average household assets are RMB 920 thousand, increased by 20.2% from the amount in 2013. After the information is reprinted by several media, it has led to a hot debate on the Internet, which main focuses on the deviation of the data and the deviation of the public's feelings.

  In fact, the data is only the initial result of household finance survey and research in 2015. With the operation of data cleansing, the final numerical value might change slightly. Here, the author would like to take this opportunity to analyze some detailed information about the data of RMB 920 thousand from several aspects.

  Where does the data come from?

  The data, the "average household assets of RMB 920 thousand", comes from the database of China Household Finance Survey (CHFS). In 2015, the Survey and Research Center for China Household Finance selected tens of thousands of household samples from 1,439 communities / villages in 363 cities / counties in 29 provinces of China through the scientific PPS stratified sampling method and successfully collected the information of more than 40,000 families on assets and liabilities and income and consumption by dispatching more than 2,500 college students who have received the training for specialized knowledge to all parts of China.

  This is the third-round survey carried out by the Center and the survey data, combined with the data of previous two rounds of survey in 2011 and 2013, forms the micro basic database of Chinese households with more detailed and reliable information. With the scientific sampling and relatively low refusal rate, the database of CHFS has good national representativeness. For instance, the data of CHFS is very close to official data in regard to several indexes such as household scale, population age structure, proportions of urban and rural population, number of party members of CPC, number of civil servants and number of micro and small-sized enterprises.

  The wealth gap concealed by the "average household assets"

  The "average number" is an index reflecting the central tendency of the data. The amount of the average household assets is the value of total assets of all households divided by the number of households. However, as the average number is likely to be affected by individual extreme values, it cannot represent the condition of the vast majority of households, and we cannot say that a household which possesses the assets less than RMB 920 thousand definitely ranks behind on a nationwide scale.

  To show the middle level of national household assets, the "median" can be used as a more appropriate index. The median refers to the number located in the middle among all observed numbers in an order from high to low. According to the preliminary data of CHFS, the median household assets are only RMB 330 thousand. If the total assets of your family are more than this amount, then it is likely that your family has ranked in the top 50% places in China.

  What is worth mentioning is that the average number of RMB 920 thousand is several times higher than the median of RMB 330 thousand. It indicates the uneven distribution of household assets and a wide wealth gap in China, which is the "truth concealed by the average number". Taking the households in Shanghai and Guizhou as an example, the preliminary data of CHFS shows that the median household assets is RMB 1.72 million in Shanghai and RMB 330 thousand in Guizhou. If we use 1.72 million and 330 thousand to represent the assets levels of households in Shanghai and Guizhou respectively and take "2 households in Shanghai (rich) and 8 households in Guizhou (ordinary)" as a group of research object, the average amount of assets of them is 1.72 million, while the median is 330 thousand, showing a twofold difference between the two values.

  The difference between the "average number" and "median" of assets reflects China's wealth gap from one side. Recently, Professor Gan Li [Weibo]has also mentioned in his article titled The Number of China's Middle Class Has Been More Than 200 million that compared with the ideal olive-shaped wealth distribution structure, the wealth distribution structure of China is of pyramid type with inequality in the distribution of wealth; at the bottom of the wealth pyramid, in China, there are still 78.9% adults whose wealth does not meet the minimum standard of the middle class. In order to narrow the wealth gap, it is imperative to increase the educational investment and strengthen the financial support for the poor households and increase transfer payments.

  Why do some people feel that they are a drag on others?

  The fact that many netizens say that they are a drag on others shows that the wealth levels of many households are below the average level indeed. However, the deviation of the public's feelings may also result from the confusion of several concepts.

  First, family vs. individual.China Household Finance Survey is based on the survey and research unit of "family" and the data, 920 thousand, is obtained by regarding a "family" as a whole research object, so the household assets of RMB 920 thousand does not represent the level of personal assets.

  Second, assets vs. wealth.Assets can be classified as financial assets and non-financial assets. The former includes cash and deposits, loans, agricultural / industrial and commercial assets, stock, funds, bonds, bank / Internet financial products, while the latter includes land, house property and durable goods. Asset by no means equals to wealth. Wealth refers to net assets, i.e. the balance of assets with the deduction of liabilities. Supposing that you have cost RMB 1 million for a house with a loan of RMB 700 thousand, although you may have become a "mortgage slave", your assets is increased by RMB 1 million. However, the net value of the house property is only RMB 300 thousand. Maybe the reason why some netizons say that their assets are actually less than the average level is that they have confused "asset" with "wealth". Besides, the proportion of house property is large in the household assets of China, resulting in the fact that more asset risks lie on the house property price which is affected by economic fluctuation; meanwhile, it also has great effect on assets liquidity.

  Third, average number vs. median.As above mentioned, the average number is just the numerical value obtained based on equal distribution and cannot represent the middle level, let alone the level of the overwhelming majority. The author hopes more people to put attention to the median rather than the average number.

  To sum up, China's average household assets are about RMB 920 thousand in 2015, but it does not mean that the majority of people have reached this level. Meanwhile, faced with a large wealth gap and excessive investment in house property allocation, the author hopes that more actions can be taken to deal with the problems. On the one hand, the government should increase the subsidies for low-income groups, enhance the popularization of financial knowledge and improve the financial knowledge level of ordinary people and help them to form correct financial management concepts; on the other hand, the government should actively guide the mass to form a rational perspective on real estate market, encourage diversified investment and promote the full optimization of assets allocation on a nationwide or even worldwide scale.

 

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