Financial Literacy in China: Priorities and a Direction

Growing income disparity, a shrinking social welfare system, expanding financial markets, and diversifying financial products have pushed economically vulnerable groups in China into greater disadvantage in recent decades. The government has acknowledged the urgency of this situation, which underscores the micro- and macro-level importance of financial literacy and of its study. In general, there are two priorities in efforts to study financial literacy in China. One is theoretical, and the other is empirical. The theoretical priority, which comes from Western research, is to develop conceptual precision; the financial-literacy framework is not well defined, fails to differentiate among related concepts, and impedes the process of measuring and exploring interactions. This paper presents results from a review of the Chinese literature and proposes adoption of a financial capability framework whose intended end is financial well-being. The empirical priority, which has emerged from China’s social and economic context, is to develop evidence-based, contextually informed research and practice to improve financial literacy