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In the meantime, 80% of individual investors on the Shanghai Stock Exchange hold stocks that account for only 13.8% of the total market value held by all retail investors. In contrast, the bottom 80% of households by disposable income in China account for 54% of total disposable income.
In summary, the data provided by the Shanghai Stock Exchange clearly shows that stock market fluctuations have a more significant impact on the absolute wealth of the top 20% of individual investors, who hold stock and cash worth over 500,000 yuan [$68,972].
The Household Sector Holds a Low Proportion of Equity Assets
Assuming each of the 220 million retail investors corresponds to a three-person household, this would imply that approximately 660 million people in China’s household sector are at least somewhat involved in holding stock-related assets. Including the 759 million mutual fund investors, the total number of direct and indirect participants in the A-share market is exceptionally large, indicating that stock market investment has essentially become a nationwide activity.
However, data from multiple surveys indicate that the proportion of equity assets within Chinese households’ total assets remains relatively low.
For instance, a conclusion from the article “2019 Survey on the Assets and Liabilities of Urban Households in China”, published in China Finance, a magazine run by the People’s Bank of China (PBOC), reveals that the average total asset value of urban households in China was 3.179 million yuan, with physical assets making up the majority—2.530 million yuan [$349,001], accounting for 80% of total household assets. Financial assets only accounted for 20% of total assets. Among financial assets, stocks and mutual funds together made up just 10%. Given the relatively low proportion of equity funds, stocks constitute less than 2% of the total assets of urban households. The proportion is likely even lower among rural households.
Household asset structure. Data source: “2019 Survey on the Assets and Liabilities of Urban Households in China” published in China Finance, Zhongtai Securities Institute
Although stocks make up only 6.4% of the financial assets of urban households, equity assets are also present to varying degrees in fund, insurance, bank wealth management, and asset management trust products. It is difficult to estimate the exact figures, but this does not change the conclusion that the proportion of equity assets in urban household financial assets remains below 2%.
Structure of Urban Households’ Financial Assets. Data source: “
2019 Survey on the Assets a
n
d
Liabilities of Urban Households in China”
published in
China Finance,
Zhongtai Securities Institute
Expanding the scope to both urban and rural populations, the proportion of equity assets in the total assets of Chinese households should be even lower. Currently, China’s urbanisation rate stands at 65%, and the proportion of equity assets held by rural households in total household assets is expected to be lower than that of urban households. Five years have now passed since 2019, and the proportion of equity assets in household portfolios should have increased. This is particularly true after the real estate market peaked in 2021, followed by a decline in property prices. As a result, the share of real estate in household assets likely decreased significantly, leading to a notable increase in the proportion of financial assets.
Among financial assets, the balance of bank deposits in the household sector has increased significantly, from 82 trillion yuan [$11.2 trillion] in 2019 to 150 trillion yuan [$20.6 trillion] today. The scale of bond assets has also grown substantially, leading to an “asset shortage.” By the end of the first half of 2024, the total scale of the bond market reached 165 trillion [$22.7 trillion] yuan, indicating a decrease in investors’ risk appetite, with bond prices rising and stock prices falling.
When comparing the asset structures of household assets in major global economies, it is found that in the United States, about 30% of household assets are allocated to stocks, in Australia about 15%, and in Taiwan about 18%. Households in Japan and the UK have lower allocations, around 7-8%, yet they are still higher than China’s.
The above analysis aims to demonstrate that stock market fluctuations have a minimal impact on the wealth or income of the vast majority of households in China, a country with a population of 1.41 billion. This conclusion is supported by two perspectives: the low proportion of equity assets in household portfolios and the high concentration of wealth among individual investors in the stock market.
Likely No Correlation Between Total Retail Sales of Consumer Goods and Stock Market Fluctuations
It is common to associate the level of consumption with stock market performance, and the logic appears straightforward: when the stock market is making money, consumer confidence increases, promoting consumption upgrades; conversely, when the stock market is losing money, people tend to cut back on spending.
To determine whether there is a correlation between stock market fluctuations and consumption, a scatter plot was created comparing the changes in the total retail sales of consumer goods with the performance of the CSI 300 index.
