In the second half of November 2005, the People’s Bankof China conducted a survey on urban household savings in about 50 cities ofvarious sizes. There were 20,000 valid responses, and the findings weresummarized as follows:
1. Households’ willingness to save inforeign exchange continued to decline, but confidence in RMB deposits keptincreasing.
On October 15, 2005, the PBC announced to raise againthe ceiling of small-value deposit rates on US dollar and Hong Kong dollar forcommercial banks. But this policy didn’t strengthen households’ confidence inUS dollar and Hong Kong dollar. According to the survey, the proportion ofhouseholds choosing to save in US dollar only accounted for 3.4 percent, down0.7 percentage points from the third quarter and from a year earlier as well.The proportion of households choosing to save in Hong Kong dollar was 1percent, down 0.3 percentage points from the third quarter and from a yearearlier as well. But the proportion of households choosing to save in RMBaccounted for 94.4 percent, increasing by 1.3 percentage points and 1percentage point compared with the third quarter and a year earlierrespectively.
2. Households’ satisfaction over current pricelevel increased moderately, and expected income to increase in the future.
According to the survey, satisfaction index ofhouseholds for current price level increased by 0.1 percentage pointsquarter-on-quarter to –12.4 percent. 24.5 percent of the surveyed consideredthe current price level “rather high and not acceptable”, down 0.6 percentagepoints from the third quarter; 63.4 percent considered the price level “relativelyhigh, but acceptable”, up 1.1 percentage points from the third quarter; 12.1percent considered the price level “satisfactory”, down 0.5 percentage pointsfrom the third quarter, but up 1.2 percentage points from the same period of2004. In September and October, the CPI published by the National Bureau ofStatistics increased by 0.7 percent and 0.4 percent month-on-monthrespectively, or 0.9 percent and 1.2 percent year-on-year respectively,indicating the growth of CPI tended to stabilize. The moderation of housingprice rise and gasoline price has also strengthened the households’satisfaction over price level somewhat.
As to the households’ expectation of future pricemovement, 41.7 percent of the surveyed forecasted the price to rise, 5.5percentage points higher than the third quarter, but only 4.3 percentanticipated the price to decline, down 1.7 percentage points from the thirdquarter, indicating a less optimistic outlook of the future price level.
Current income sentiment index was 14.3 percent, up0.3 percentage points from the third quarter. Future income confidence indexstood at 21.5 percent, increasing by 2.4 and 1.2 percentage points from thethird quarter and a year earlier respectively.
3. Urban households became more willing to save, althoughtheir acceptance of the current interest rate dropped.
At the current price and interest rate level, 39.5percent of the surveyed households considered saving as more desirable, up 1.6percentage points from the third quarter, remaining the same as a year earlierwhen interest rate was raised, the second highest in the last two years.However, households’ acceptance of deposit rate fell slightly from the thirdquarter. According to the survey, 62.1 percent of the surveyed considereddeposit rate as “l(fā)ow”, up 2 percentage points from the third quarter; 36.3percent considered interest rate as “appropriate”, down 1.4 percentage pointsfrom the third quarter. Despite declined acceptance of the current interestrate, households were still willing to save as they only have limitedinvestment channels. The recent stock market adjustment cooled down investors’confidence in the market once again. According to the survey, only 5.1 percentof the surveyed considered “investment in stock market” as a sensible choice.The limited volume of government securities also couldn’t meet investmentdemands, so households were forced to save in bank deposits.
4. Households’ willingness to consume eased, withless households willing to buy homes.
According to the survey, 29.5 percent of the surveyedconsidered “more consumption”(including consumption by borrowing) as a sensiblechoice, down 0.3 percentage points from the third quarter, or 1 percentagepoint from a year earlier. The percentage of households willing to buy homeswithin the next three months declined by 0.4 percentage points from the thirdquarter to 19.2 percent, 2 percentage points lower than the same period of2004. Recently, the real estate market has witnessed some new changes since theimplementation of the macro control policies, such as the growth of housingprices in some cities decelerated, housing price in Shanghai even dropped, andhouseholds kept watching market movements instead of buying homes. According tothe survey results in 7 big cities, the percentage of households willing to buyhomes in the next three months in Wuhan declined by 5.5 percentage points fromthe third quarter, the biggest fall in the 7 cities; the percentage in Beijingreversed to fall by 2 percentage points from the third quarter after rising intwo consecutive quarters; the percentage in Shanghai rose by 3.7 percentagepoints from the third quarter, but still remained low since a year ago.
5. Households’ liabilities shrinked, with borrowingfrom both individuals and banks decreasing.
According to the survey, 74.9 percent of the surveyedhouseholds were “without liability”, up 2.4 and 2.7 percentage points from thethird quarter and a year earlier respectively; 9.6 percent borrowed fromindividuals, down 1.9 percentage points from the third quarter; 13.7 percentborrowed from banks, 0.4 percentage points lower than the third quarter and 0.7percentage points lower than a year earlier. The percentage of households withliabilities declined to the lowest level in three years, because macro policiesin real estate sector effectively contained speculative demands for housing,resulting in decelerated growth of home mortgage loans. Besides, the banks alsoincreased the threshold of consumer loans and enlarged the proportion ofconsumer loans subject to interest rate increase, thus reducing effective demandsfor consumer loans as well as households’ liabilities.
