Asset's structure, household heterogeneity and wealth effects in China: evidence from the China Household Finance Survey 2015 and 2017

This thesis uses China Household Finance Survey data (CHFS) to conduct an empirical study of the relationship between variations in asset value and asset structure and household consumption in China. Owner-occupied housing, the value of liquid assets and illiquid assets, income, demographic characteristics, and aggregate consumption for each household are considered. This thesis also classifies and discusses hand-to-mouth households, that is those holding no or few liquid assets (e.g., cash and savings account), in China based on Kaplan and Violante’s (2014) method and explores the wealth effect of those households on consumption. There are two important empirical results, which can contribute to policy: first, the wealth effect of liquid assets, illiquid assets, and housing assets is positive; and second, Chinese hand-to-mouth households have higher consumption–income elasticity than non-hand-to-mouth households.