Financial Inclusion in China: Use of Credit
Limited access to credit can cause financial vulnerability for a household and economic loss for a country. Previous studies have shown that only small portions of the population in developing countries had access to formal credit, and few of them focused on Chinese populations. Using data from 2011 China Household Financial Studies, this study explores Chinese households’ credit use. We found that over half of the sample (53.21%) used credit, and only 19.77% used formal credit. Use of formal credit was associated with socioeconomic characteristics of household heads (e.g., employment, education) and households (e.g., income, net worth). The findings suggest that promoting financial inclusion in China involves expanding access to formal credit among the socially and economically disadvantaged households.
KeywordsAccess to credit Formal credit Financial inclusion Chinese households
- Ali, I., & Zhuang, J. (2007). Inclusive growth toward a prosperous Asia: Policy implications (ERD Working Paper No. 97). Retrieved from Econstor website: http://www.econstor.eu/bitstream/10419/109299/1/ewp-097.pdf.
- Applied Research and Consulting LLC (2009). Financial capability in the United States: Initial report of research findings from the 2009 National Survey. New York, NY: Applied Research and Consulting LLC.Google Scholar
- Barr, M. S. (2004). Banking the poor: Policies to bring low-income Americans into the financial mainstream (Metropolitan Policy Program Research Brief). Washington, DC: Brookings Institution.Google Scholar
- Campero, A., & Kaiser, K. (2013). Access to credit: Awareness and use of formal and informal credit institutions (Banco de México Working Paper No. 2013-07). Retrieved from Econstor website: http://www.econstor.eu/bitstream/10419/83717/1/751106259.pdf.
- Clamara, N., Peña, X., & Tuesta, D. (2014). Factors that matter for financial inclusion: Evidence from Peru (Working Paper No. 14/09). Retrieved from BBVA Research website: https://www.bbvaresearch.com/KETD/fbin/mult/WP_1409_tcm348-426338.pdf.
- Demirgüç-Kunt, A., & Klapper, L. F. (2012). Measuring financial inclusion: The Global Findex Database (Working Paper No. 6025). Retrieved from World Bank Group website: http://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-6025.
- Demirgüç-Kunt, A., & Levine, R. (2008). Finance, financial sector policies, and long-run growth (Working Paper No. 4469). Retrieved from World Bank Group website: http://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-4469.
- Fungáčová, Z., & Weill, L. (2014). A view on financial inclusion in Asian countries (BOFIT Policy Brief No. 8). Helsinki: Bank of Finland.Google Scholar
- Geng, N., & N’Diaye, P. (2012). Determinants of corporate investment in China: Evidence from cross-country firm level data (IMF Working Paper No. 12/80). Retrieved from International Monetary Fund website: http://www.imf.org/external/pubs/ft/wp/2012/wp1280.pdf.
- Hale, G. B., & Long, C. X. (2010). What are the sources of financing of the Chinese firms? (HKIMR Working Paper No. 19/2010). Retrieved from ResearchGate website: https://www.researchgate.net/profile/Galina_Hale/publication/228225053_What_are_the_Sources_of_Financing_of_the_Chinese_Firms/links/0deec52a60bb271205000000.pdf.
- Han, R. & Melecky, M. (2013). Financial inclusion for financial stability. Access to bank deposit and the growth of deposits in the global financial crisis (Policy Research Working Paper No. 6577). Washington, DC: The World Bank. Retrieved from SSRN website: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2312982.
- Hannig, A., & Jansen, S. (2010). Financial inclusion and financial stability: Current policy issues (ADBI Working Paper No. 259). Retrieved from Asian Development Bank Institute website: http://www.adb.org/sites/default/files/publication/156114/adbi-wp259.pdf.
- He, G., Du, X., Bai, C., & Li, Z. (2009). China microfinance industry assessment report. Beijing: China Association of Microfinance. Retrieved from World Bank website https://www.microfinancegateway.org/sites/default/files/mfg-en-paper-china-microfinance-industry-assessment-report-feb-2009_0.pdf.
- Imboden, K. (2005). Building inclusive financial sectors: The road to growth and poverty reduction. Journal of International Affairs, 58(2), 65–86.Google Scholar
- Li, S., & Luo, C. (2008). Growth pattern, employment, and income inequality: What the experience of Republic of Korea and Taipei, China reveals to the People’s Republic of China. Asian Development Review, 25(1/2), 100–118.Google Scholar
- Lin, T., Zhuang, J., Yarcia, D., & Lin, F. (2008). Income inequality in the People’s Republic of China and its decomposition: 1990–2004. Asian Development Review, 25(1/2), 119–136.Google Scholar
- McKernan, S.-M., & Sherraden, M. (Eds.). (2008). Asset building and low income families. Washington, DC: Urban Institute.Google Scholar
- Meng, X. (2007). Wealth accumulation and distribution in urban China (Institute for the Study of Labor [IZA] Discussion Paper No. 2553). Bonn: The Institute for the Study of Labor. Retrieved from Econstor website: http://www.econstor.eu/bitstream/10419/34173/1/526123575.pdf.
- Peachey, S., & Roe, A. (2006). Access to finance: What does it mean and how do savings banks foster access (World Savings Bank Institute Perspectives Paper No. 49). Retrieved from Microfinance Gateway website: http://www.microfinancegateway.org/sites/default/files/mfg-en-paper-access-to-finance-what-does-it-mean-and-how-do-savings-banks-foster-access-jan-2006_0.pdf.
- Pearlman, S. (2010). Flexibility matters: Do more rigid loan contracts reduce demand for microfinance? (CFA Working Paper No. 2010/10) Retrieved from CAF website: http://scioteca.caf.com/bitstream/handle/123456789/214/201010PearlmanSEptiembre2010.pdf?sequence=1andisAllowed=y.
- Pería, M. S. M. (2013). Financial inclusion in Latin America and the Caribbean. In T. Didier and S. L. Schmukler (Eds.), Emerging issues in financial development: Lessons from Latin America (pp. 91–127). Retrieved from World Bank website: https://openknowledge.worldbank.org/bitstream/handle/10986/16387/9780821398289.pdf?sequence=1#page=117.
- Sherraden, M. (1991). Assets and the poor: A new American welfare policy. Armonk, NY: M. E. Sharpe.Google Scholar
- Song, C. (2015). Financial illiteracy and pension contribution: A field experiment on compound interest in China (Working Paper). Retrieved from SSNR website: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2580856.
- Sparreboom, P., & Duflos, E. (2012). Financial inclusion in the People’s Republic of China: An analysis of existing research and public data (China Papers on Inclusiveness, No. 7). Washington, DC: Consultative Group to Assist the Poor and the Working Group on Inclusive Finance in China.Google Scholar
- Tang, S., Guan, Z., & Jin, S. (2010). Formal and informal credit markets and rural credit demand in China (Conference paper). Retrieved from ResearchGate website: https://www.researchgate.net/profile/Songqing_Jin/publication/254384094_Formal_and_Informal_Credit_Markets_and_Rural_Credit_Demand_in_China/links/53edf0b60cf2981ada173d48.pdf.
- Tejerina, L., & Westley, G. D. (2007). Financial services for the poor: Household survey sources and gaps in borrowing and saving (Sustainable Development Department Technical Paper No. POV-117). Retrieved from Inter-American Development Bank website: http://services.iadb.org/wmsfiles/products/Publications/1052427.pdf.
- Zhuang, J. (2008). Inclusive growth toward a harmonious society in the People’s Republic of China: Policy implications. Asian Development Review, 25(1/2), 22–33.Google Scholar