The Center for East Asia Macroeconomic Studies is very honored to welcome Prof. Rongrong Sun from the Henan University, China on the 9th of august in Hagen. Prof. Sun will present her current research as part of her talk called “What Explains Household Borrowing and Credit Constraints? Evidence from China” (see also abstract below). After the talk all present will have the possibility to ask questions or discuss the findings that Prof. Sun presented.
Further information are available at the homepage of the chair of Macroeconomics from the FernUniversität (you can find it here).
This paper uses the three rounds of the CHFS survey (2011and 2013) to examine the determinants of household credit demand and credit constraints in China. In 2011, about the half of the households that had a desire of bank credits were facing credit constraints, which declined to 34 percent in 2013. In general, the credit market participation rate in China is moderate, 14 percent in 2013, which is partly accountable to troublesome application procedures and financial illiteracy among households.
The empirical estimation results suggest that income, wealth and education qualifications are the main factors driving credit market participation, while high income, high wealth and more education lower credit constraints. The family size, the home ownership and being self-employed have positive significant impact on both.
The likelihood of being credit constrained and the chance of obtaining a loan, while being unemployed significantly increases the likelihood of being credit constrained only.
In China, the likelihood of being credit constrained peaks at 33 years old.
Moreover, the results show that people in the western region are less likely to be credit constrained on average. This implies the existence of regional imbalance in financial developments in China, despite the current general credit ease.