Editor's note: The following article is a summary of a recent report on household finance in China that appeared on the Chinese web portal NetEase. The report reveals a rather surprising finding: the total net assets for all Chinese households is now greater than the American total by a significant margin of 21%. An interview with economist Gan Li sheds some light on how this happened and what it means for China's economy.

(photo: Panaramio)

According a recent report on Chinese household finance, the total net assets owned by all Chinese households is 21% greater than Americans'. The report also noted that the average net assets—assets minus liabilities equal net assets—of Chinese families with an urban hukou (official residency) had risen to 2,470,000 RMB, and that the total homeownership rate in all China is currently as high as 89.68%. So how did Chinese families manage to surpass their American counterparts? Gan Li, director of the School of Economics at China's Southwestern University of Finance and Economics explains:

Gan: Our sampling methods were the same as those used by the U.S. Federal Reserve Bank. First we took a random sampling of 8,438 Chinese households and compared many macroscopic sets of data. Next we looked at assets for each household, including property, real estate, financial assets (bank accounts, stock holdings, bonds and even gold), cars, family businesses and land holdings. So it's an extremely thorough set of data. We wanted to be able to compare it to the American data in every aspect.

There are, of course, skeptics. Everyone knows China's economy is developing at a break-neck pace, but are we really to believe that Chinese families' total net assets exceed America's by more than 20%? The answer, says Gan, lies mostly with real estate valuation:

Gan: Real estate accounts for 70% of Chinese households' total assets; that figure is only 30% for American households. It seems we Chinese just love buying up real estate, even as prices continue to rise relatively quickly. The U.S. real estate market, on the other hand, has shrunk drastically in the wake of the 2008 financial crisis. Add to that a high population and a rising number of households, and there you have it: total household assets are simply greater than America's. Per capita, however, Chinese household assets are still only a quarter of America's.

Financial assets count for only 5% of Chinese household assets, compared to 38% in the U.S. Conversely, real estate takes up 70% of Chinese and 30% of American household assets, a situation that Gan believes to be quite high-risk:

Gan: 20 years ago the Japanese real estate bubble pushed Japanese total assets way ahead of America. Though, now that the bubble has burst, Japan's assets have sunk to only 60% of America's, even lower than our own.

As to why China's home ownership rate is approaching 90%, Gan says this has a little to do with the methods used to calculate the statistics, and a lot to do with the definition of a "household":

Gan: Because more than 90% of rural households currently own their own home, the 85-86% rate for homeownership in urban areas increases several percentage points when the national average is calculated. Additionally, we're basing our definition on the international survey standard for "household", even though it includes a few cases where survey participants don't list themselves as residents, for instance when adult children live with their parents.

Source: 360doc.com
 

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Keywords: Chinese household net assets China real estate prices China America net assets comparison