Assessing Macro-Financial Risks of Household Debt in China

Fei Han, Emilia Jurzyk, Wei Guo, Yun He and Nadia Rendak

No 2019/258, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; household debt; consumption growth; debt; LTV ratio; household indebtedness; GDP ratio; household default; DSTI ratio; Income; Consumption; Housing prices; Household consumption; Income shocks; Global (search for similar items in EconPapers)
Pages: 25
Date: 2019-11-27
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (6)

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