Journal Article: "Housing Wealth and Household Savings: Evidence from China's Housing Reform"

Title: Housing Wealth and Household Savings: Evidence from China's Housing Reform

Authors: Fu Lin, Gao Jie, Dai Xi, Yao Yi-ying

Language: Chinese

Publication: Journal of Central University of Finance & Economics, July 2024, No. 7, 1000-1549: 3-14

English Abstract: 

        Since the 21st century, with the development of the economy and the rapid growth of the housing prices, housing wealth has become one of the most important parts of household wealth and an important factor influencing household savings in China. The report of the 20th National Congress of the Communist Party of China clearly states that we must focus on expanding domestic demand and enhancing the fundamental role of consumption in economic development. How to reduce household savings and then increase household consumption triggers great concern to the academia and the government. Since 2006, the Chinese government has successively promulgated a series of housing policies. The down payment ratio and tax burden of houses with an area of less than or equal to 90 square meters have dropped significantly, resulting in a discontinuity in the growth rate of housing value around 90 square meters. This paper applies discontinuity regression caused by housing policy shocks and uses data from the China Household Finance Survey (CHFS) to explore the impact of housing wealth on household savings of urban residents. This paper finds that the unexpected growth in housing wealth can significantly increase residents' total household savings. Additionally, the paper furhter illustrates that this effect is more significant among the middle-aged group, the group with debt, and the group with unstable jobs. Therefore, when the government carries out housing policy reform, it must pay more attention to the impact of the policy on different groups. The empirical findings of this paper have important policy implications for expanding domestic demand, fostering more drivers of economic growth, and achieving high-quality development.