The credit risk of Chinese households:A micro-level assessment

Using three waves of the China Household Finance Survey (CHFS), we present basic facts about indebtedness and financial fragility of households in China between 2011 and 2015. We show how the total debt and mortgage debt (LTV) are distributed among different income groups, and how they change over time. Our stress tests suggest that Chinese households in higher quintiles, despite the huge increase in household indebtedness, are not vulnerable to declining incomes or falling house prices, while the low-income households face high vulnerability and struggle to meet their debt commitments. However, the participation rate of low-income households in the debt market is low, and household debt is mainly held by wealthier and higher-income households. Our results suggest that the systematic default risk of Chinese household debt is moderate