Assessing Macro-Financial Risks of Household Debt in China

By Fei Han, Emilia M Jurzyk, Wei Guo, Yun He, Nadia Rendak

November 27, 2019

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Fei Han, Emilia M Jurzyk, Wei Guo, Yun He, and Nadia Rendak. Assessing Macro-Financial Risks of Household Debt in China, (USA: International Monetary Fund, 2019) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Consumption, Household consumption, Housing prices, Income, Income shocks, National accounts, Prices

Keywords: Consumption, Consumption growth, Debt, DSTI ratio, GDP ratio, Global, Household consumption, Household debt, Household default, Household indebtedness, Housing prices, Income, Income shocks, LTV ratio, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/258
Stock No:

WPIEA2019258
ISBN:

9781513516073
ISSN:

1018-5941

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