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China: A Snapshot

Wednesday was our Personal Finance Symposium: “Your Financial World Begins at Home”.  I think it was a great success and I missed seeing some of you.  The group was quite diverse, ranging in age from an 11 year-old, home-schooled child to an elderly, well-respected resident and owner of a local insurance company.  (I think he is elderly, only because it is publicly recorded that he watched a Buster Keaton film at the opening of Columbia’s lovely Missouri Theater in 1928.  You’d never know it by his love of life and knowledge.)

I presented an overview of what we know about Chinese households, while both the Chair of the Finance Department and the Dean of the Business School of Renmin University in Beijing gave an overview of how and why the Chinese make the decisions they make.  It was fun.

So, in case you weren’t in the audience, here is a quick overview.  You should know that these data are from 2,095 households in tier one and tier two cities in China, representing the more affluent Chinese. The data were collected in 2008.

ASSET OWNERSHIP:

The above is based on an average level of assets of $81,010 (US Dollars), with $22,630 of those assets in financial assets.  The key points that I find of interest are:

  • A higher proportion of Chinese own individual stocks (27.84%) compared to mutual funds (16.43%).  This is as a result of a relatively new mutual fund industry that has performed poorly and where trust in the firms has yet to develop.  Moreover, the Chinese population is quite independent, as well as analytical, resulting in more “stock picking” and less diversification.
  • Only 7.48% own bonds, a lower risk asset.
  • Over 50% have cash-value life insurance.  The growth in the life insurance industry in Asia has been phenomenal over recent years.
  • Only 15.59% own an automobile!  I will admit that when I was in Beijing it seemed like everyone had a car.  Yet, with a population of over 17 million – there are a lot of cars!
  • 85.29% own a home.  This is greater than the rate of homeownership in US cities.  While many of these homes are passed from generation to generation, there is a lot of speculation occurring in the urban Chinese housing market.  Everyone is trying to buy a home.  For more information check out this article, China must end property bubble; even if painful.

DEBT:

What more can I say that is not said in the above picture?

  • Only 8.78% of the households hold a mortgage, while over 85% own a home.
  • Less than 1% of the households have automobile loans, while 15.59% own a car.
  • Less than 1% have consumer loans, while 100% are consumers.

I don’t think I need to say anything more.  I do hope, however, that this makes you think about your choices and our future for financial success.