In late November2007, the People’s Bank of China conducted a questionnaire survey on householdsavings in 50 large, medium and small-sized cities across the country. Therewere 20,000 valid responses, and the findings are summarized as follows:
1. Urbanresidents’ income remained basically stable, and affected by seasonal factors,income expectations were widely favorable
Overall speaking,urban residents’ income remained basically stable, buttressed by thecross-the-board increase in 2006. According to the survey, more than 60 percentof respondents considered their incomes “basically unchanged”, and this ratiohas increased quarter by quarter from 57.6 percent of the first quarter to 64.5percent of the fourth quarter of this year, an accumulative rise of 6.9percentage points.
Income expectationfor the first quarter of 2008 was widely favorable. Judging by historic data,due to the influence of the “two festivals (the New Year and the Chinese SpringFestival)”, the ratio of residents considering their incomes will “increase”usually reaches the highest level in the fourth quarter, and 2007 is noexception. 29.4 percent respondents expected their incomes to “increase”, 1.1percentage points higher than the previous quarter, and 0.9 percentage pointshigher than the ratio of respondents who considered their incomes “increased”in the current quarter.
2. More thanhalf of the respondents considered price level “too high and unacceptable”, andmore than 60 percent of respondents expected price level to continue rising
The survey showsthat respondents considering the price level “too high and unacceptable”account for a record high of 47.6 percent, 0.5 and 23.2 percentage pointshigher than the previous quarter and the same period of last year respectively,reversing the formal situation that predominant respondents considered theprice level “relatively high but acceptable” in the preceding three years, andthis ratio decreased to 48.8 percent, down 0.6 and 15.7 percentage points fromthe previous quarter and the same period of last year respectively. This changeindicates that nearly half of the respondents felt the pressure of price increase,in particular, the recent continuous price hikes of meat, eggs and vegetableshad a substantive impact on the livelihood of residents.
Besides, 64.8percent of respondents considered the price level would continue to rise,hitting a record high, 3.4 and 14 percentage points higher than the previous quarterand the same period of last year.
3. Due tosuccessive interest rate hikes by the central bank and the turbulence in thestock market, residents’ preference for saving deposits rose instead ofdeclining, and resident’ enthusiasm of investing in stocks and mutual fundsslowed down markedly
1) Nearly 50percent of residents considered the deposit rate “appropriate”, and residents’preference for saving deposits recovered somehow.
The successiveinterest rate hikes and interest tax cut unwound their effects, and publicacceptance of deposit rates improved quarter by quarter. The survey shows thatsince the second quarter of this year, the proportion of respondents regardingthe deposit rates as “appropriate” increased quarter by quarter, rising from 39.6percent of the first quarter to 46.3 percent of this quarter, an accumulativerise of 6.7 percentage points, setting a record high since the survey waslaunched. With the improvement in the public acceptance of deposit rate and therecent adjustments in the stock market, the residents’ preference for savingdeposits recovered. In the fourth quarter, 30.2 percent of residents preferred “moresaving deposits”, up 4.9 percentage points over the previous quarter, reversingthe trend of continuous declines in the preceding four quarters.
2) Due to theturbulences and adjustments in the stock market, urban residents’ enthusiasm ofinvesting in stocks and mutual funds cooled down rapidly.
The survey showsthat in the fourth quarter, the proportion of residents who thought “invest instock market is the best choice” dropped rapidly to 35.8 percent, down 8.5percentage points over the previous quarter, temporarily reversing the rapidlyincreasing trend during the preceding four consecutive quarters. Residents consideringstocks as their households’ top financial asset dropped to 9.8 percent in thisquarter, down from the historic high (12.8 percent), an accumulative fall of 3percentage points from the preceding two consecutive quarters. And theproportion of households considering “funds” as their households’ top financialasset began to drop in the fourth quarter, down 0.4 percentage points from thehistoric high (25.4 percent) in the third quarter to 25.0 percent.
4. The urbanresidents’ propensity to consume rebounded, and in particular, their desire tobuy large item durable consumer goods rebounded somehow, while their preferencefor home purchase remained at low level.
The survey showsthat urban residents’ willingness to consume continuously set a new low quarterby quarter since the fourth quarter of 2006, but this figure saw a slightrebound in the fourth quarter after it hit a record low of 18.3 percent in thethird quarter. The proportion of residents considering it sensible to “consumemore or consume on credit” accounted for 21.2 percent, up 2.9 percentage pointsover the previous quarter, but still down 3 percentage points from the sameperiod of last year.
In terms ofpurchasing automobiles, homes and large durable consumer goods, only thepercentage of residents willing to buy large item durable consumer goods rose,up 0.7 percentage points over the previous quarter, while the proportions ofresidents willing to buy automobiles and homes dropped, down 0.1 and 0.1percentage points from the previous quarter respectively, in particular,residents’ willingness to buy homes dropped to its second historical low.
Residents’willingness to buy home decreased on a row of 7 quarters since the end of 2005.Although it witnessed some sign of recovery in the third quarter of this year,the recovery did not sustain momentum. The reason is that some adjustmentpolicies concerning real estate loans had been promulgated, such as thoseincreasing the ratio of down payment for the second home mortgage, applyingupward floating lending rate, which discouraged some potential home-buyers.Among the 7 cities surveyed, except for Guangzhou and Chongqing, other five cities all saw a decline inresidents’ willingness to buy homes from the previous quarter, in particular, Beijing and Tianjin slid most, down 7 and 3.5 percentagepoints from the previous quarter. In terms of residents’ income structure,lower- and median-income households’ willingness to buy homes decreased as homeprices had been rising steadily. However, high-income households stillhad relatively strong incentives to buy homes. The survey shows thatwillingness of households with annual income between 20,000-50,000 yuan andabove 50,000 yuan reached a yearly high, to 28.4 percent and 33.1 percent,higher than other income categories, and up 2.5 and 2.5 percentage points overthe previous quarter respectively.
