Abstract
With China’s rise in the global economy, more couples participate in financial investing. Using the 2011 China Household Finance Survey, we examined factors influencing stock and fixed-income investments in the cities. Couples with urban residency were more likely to invest than couples without urban residency. Compared to traditional couples with highly-educated husbands only, couples with only highly-educated wives invested similarly, whereas couples with two highly- (less-) educated spouses were more (less) likely to invest. Further, we investigated how these relationships were mediated by household income and wealth, financial literacy, information acquisition, and risk tolerance. Overall, our findings suggest that household investing is shaped by both family structure (i.e., spouses’ educational pairing) and institutional advantage (indicated by urban residency).
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Notes
In 1998, the State Council approved a guideline that children can choose to inherit hukou from the father or the mother (previously, hukou was inherited from the mother) (Fan 2008).
According to the CHFS data user manual, the goal was to select 80 counties that not only covered diverse geographic regions but also contained enough observations from relatively wealthy areas in China. Therefore, the survey team sorted the 2585 counties into ten strata based on their GDP per capita. In each stratum, eight counties were randomly drawn with PPS where each county was weighted by its population size. In this way, 80 counties covering 25 provinces in China were selected.
We excluded households in rural China from our analysis for two reasons. First, household financial participation was very low in rural China (Gan et al. 2016) and the sample size was too small to yield valid results. Our supplementary analysis showed that in the 2011 CHFS, 1.68% (43 out of 2557) and 1.60% (41 out of 2557) of the households in rural China invested in stocks and fixed-income financial commodities, respectively. Second, there was limited variation in the independent variables of our interest. Specifically, because urban-to-rural migration was very rare, 91.98% of the couples in rural China involved at least one spouse with agricultural hukou. Additionally, couples in which neither spouse had any college education accounted for 96.56% of the 2557 couples in the rural sample.
We grouped all the non-stock financial products into one category for two reasons. First, stock is the major instrument in China’s financial market while other financial instruments are still developing (Gan et al. 2014, p. 95). The values of stocks are more volatile than the others and those emerging instruments often promise low-risk (i.e., rigid redemption) in the early days. Even though mutual funds, derivatives, and wealth management products are not fixed-income securities by name, they come with much lower risks than stocks in China and resemble each other. Second, all the financial products that we referred to as “fixed-income products” were asked in one multiple choice question during the survey. Thus, they were likely considered to belong to the same category of financial products from both interviewers’ and interviewees’ perspectives.
US studies tend to differentiate college graduates from those with some college education (e.g., Finke et al. 2011; Joo and Grable 2004), but for our sample, in which the husbands’ and wives’ mean ages were about 49 and 47 years, most couples were in college ages before the onset of China’s higher education expansion in 1999 (Yeung 2013). As a result, sample sizes were too small to allow for breaking down the college educated into individuals with some college education and college graduates (see Yao and Xu 2015, a study of Chinese urban households’ financial market participation, for a similar coding of college-educated individuals).
In 1998, the State Council approved one guideline, which specifies that rural residents who have lived in the city for more than one year and whose spouses hold urban hukou may be granted urban hukou (Fan 2008). Thus, arguably, spouses with agricultural hukou who married individuals with urban hukou could eventually convert from rural to urban hukou status.
Indeed, the share of housing assets in total household wealth is higher in China than in the United States, whereas the share of financial assets is lower in China than in the United States (Xie and Jin 2015, pp. 212–213; China Household Finance Survey and Research Center 2016, p. 3). These differences in the composition of household wealth portfolios likely reflect China’s recent history of economic reforms and the privatization of housing properties. They may also be due to differences in the development stage of financial markets and cultural variations in wealth building strategies between China and the United States (see Barth et al. 2009; Xie and Jin 2015; Killewald et al. 2017 for detailed discussions).
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Acknowledgements
The authors appreciate comments on earlier drafts from Megan Doherty Bea, Bill Lavely, and Erin York Cornwell and feedback from the Center for China Financial Research at University of Colorado Denver. We gratefully acknowledge funding support from the Department of Sociology at the University of British Columbia and thank Southwestern University of Finance and Economics in China for providing the data and responding to our questions. An earlier version of this paper was presented at the 2017 Annual Meeting of American Sociological Association.
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Yue Qian received funding support from the Department of Sociology at the University of British Columbia.
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Li, N., Qian, Y. The Impact of Educational Pairing and Urban Residency on Household Financial Investments in Urban China. J Fam Econ Iss 39, 551–565 (2018). https://doi.org/10.1007/s10834-018-9579-2
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DOI: https://doi.org/10.1007/s10834-018-9579-2