سیاست های پولی، قیمت دارایی ها و مصرف آن در چین

This paper studies the wealth channel in China. Although the wealth channel has been found to be functioning in many advanced countries, its existence is yet to be explored in most emerging economies, also in China. In order to illuminate dynamics between monetary policy, asset prices and consumption, we use the structural vector autoregression method. The findings support the view that a loosening of China's monetary policy does indeed lead to higher asset prices. Furthermore, a positive shock to residential prices increases household consumption, while the role of stock prices seems to be small from the households’ point of view. Finally, we test the existence of the wealth channel more formally to find out whether those changes in asset prices that are caused by monetary policy are significant enough to increase consumption. In summary, the wealth channel remains weak but there are some signs of it via residential prices. The results are not that different from those attained for the advanced economies, where the size of the wealth channel has been found to be limited.

One of the monetary policy transmission channels is the so-called wealth channel. It implies that monetary policy can affect the real economy via its impact on asset prices. For example, a loosening of monetary policy is often linked with an increase in asset prices which can then have a positive impact on firms’ investment behaviour or household consumption. In the advanced economies, the wealth channel has frequently been introduced to macroeconomic models analysing the impacts of monetary policy on the real economy. However, the evidence of the wealth channel in emerging markets is still questionable, mainly due to underdeveloped asset markets in these economies. In this paper, we study whether the wealth channel exists in China. In particular, we explore whether monetary policy can have an impact either on housing or stock prices, and if so, whether these price developments are capable of influencing household consumption. In addition to the fact that the wealth channel in China has not been studied before, this paper is motivated by the growing importance of the stock and residential markets in the Chinese economy. For decision makers it is essential to know whether the asset markets provide another monetary policy transmission channel in the country. Furthermore, taking into account China's rapidly increasing role in the world economy, the knowledge of the dynamics of the Chinese economy is essential for other economies as well. Interestingly, developments in the two asset markets – stock and residential markets – have been rather uneven in China. In particular, the stock markets have had a bumpy ride, as share prices experienced several booms and busts right after the opening of the Shanghai Stock Exchange in 1992 (see Fig. 1). During the first years of the 2000s, market performance remained weak – especially compared to the strong performance of the economy. The weakness of the stock market was thought to be mainly due to institutional problems such as lack of transparency, low quality of listed companies, weak minority shareholder rights, limited role of institutional investors, and the unclear plan to sell state-owned shares.1 Efforts were made to revive investors’ interest in the stock markets through institutional reforms touching on some of these problems, which in part led to another stock market bubble in 2006–2007, as share prices rose fivefold in less than two years before the market crashed again. The sharpest monthly drop in the Shanghai A-Index amounted to almost 25% in October 2008. Since the beginning of 2009, stock markets have recovered to some extent.Compared to the high volatility of stock markets, developments in Chinese housing prices have been consistently positive, even though extensive reforms have also targeted this sector (see Fig. 1). Liang and Cao (2007) divide the reforms into three subperiods. The last of the three began in 1998, after which most of the apartments were privatised and the market mechanism was allowed to function. Nowadays 80% of urban residents own their apartment in China.2 However, the public sector has maintained its role as a moderator in the real estate market, not least because of its monopoly in supplying land. Moreover, minor regulatory changes, e.g., in respect of minimum down payments and land usage, are still common. Housing prices have performed favourably for many years since the start of the data series in 1998. The strong uptrend ended only in 2008 and even then the period of declining prices was short-lived; since the spring of 2009, prices have been on the rise again. In the past, asset prices had virtually no impact on the Chinese economy. The size of the stock markets compared to the economy was small, and until the second half of the 1990s, apartments were owned by the public sector. Profound economic reforms have gradually increased the importance of asset markets in the economy. During the stock market boom in 2007, the number of stock accounts rose to 139 million (Leung and Yim, 2008).3 In addition, more and more companies are obtaining external finance by listing on stock markets. The total capitalisation of the Shanghai and Shenzhen Stock Exchanges, which amounted to just 5% of GDP in the mid-1990s, peaked at 120% of GDP at the end of 2007. At the same time, the real estate sector has become one of the key segments of the Chinese economy along with the fast increase in household wealth and the vast migration from rural areas to cities. The volume of investment in the sector amounts to 10% of GDP on average. From the point of view of the wealth channel, however, the relevance of asset market development for household behaviour is still questionable as only 2.3% of total household income was classified as property income in 2008 (see Fig. A1 in Appendix A). We study the wealth channel in China by using a structural VAR model. According to our results, a loosening of monetary policy does indeed lead to higher asset prices in China. When money supply increases, both residential and stock prices rise. In addition, positive asset price developments are linked to higher household consumption as a rise in residential prices leads to an increase in household consumption after about a year. Also, an increase in stock prices boosts household consumption, but the positive impact is less robust than from the residential prices. Even if our findings support the role of property prices in the Chinese economy, we still had to test the existence of the wealth channel more formally to find out whether those changes in asset prices that are caused by monetary policy are significant enough to increase consumption. In this regard, we can conclude that the wealth channel remains rather weak, but there are weak signs of the channel via the residential prices. This result actually follows rather closely the papers studying the wealth channel in the advanced economies, which conclude the size of the wealth channel to be relatively small. The paper is organised as follows. We first present a short overview of the earlier vast theoretical and empirical literature on the wealth channel. As mentioned earlier, we are not aware of any papers that examine whether monetary policy affects household consumption in China via its impacts on asset prices. After the literature review, we describe the data and methodology for estimating the links between monetary policy, asset prices and household consumption in China. The fourth section contains a summary of the results, and in the fifth section we conclude and draw some policy implications.

This paper aims to increase the understanding of the monetary policy transmission mechanism in China. In particular, we have tried to answer the question whether monetary policy influences household consumption via an impact on household wealth. Links through both the housing and stock markets are explored. This is the first attempt to study the wealth channel in China although the question is highly relevant from the policy perspective, as for efficient decision making it is fundamental to have a deep knowledge of the monetary policy transmission mechanism in the economy. Taking into account the specific characteristics of the Chinese economy, for example the gradual reforms in the financial sector, it is not possible to rely on earlier findings on the advanced economies when making conclusions concerning the transmission mechanism in China. On the other hand, taking into account China's position as the world's largest emerging economy, the results using the Chinese data may have some implications for other emerging countries with similar economic structures. In this study, we explore how important the impact of monetary policy on asset prices is from the point of view of household consumption. We analyse the wealth channel by using a structural VAR model and data for 1998–2008. According to the results, a loosening of monetary policy does indeed lead to higher asset prices in China. Furthermore, urban households’ consumption reacts positively to a rise in either residential or stock prices, although the effects concerning the stock prices are weak. Finally, we test the existence of the wealth channel more formally to find out whether those changes in asset prices that are caused by monetary policy are significant enough to increase consumption. The wealth channel is found to be very weak and functional only via the residential prices. There is no evidence at all of a wealth channel via the stock prices. This outcome is not surprising when taking into account that even in the advanced economies the importance of the wealth channel has been estimated to be rather small (Ludvigson et al., 2002). Furthermore, as mentioned above, the share of property income of household income is still small in China and the volatility and unpredictability of the Chinese stock markets probably reduces the impact of stock prices on households’ behaviour (Lettau and Ludvigson, 2004 and Ludvigson et al., 2002). Higher housing prices may even encourage some households to increase their saving in order to be able to afford an apartment, and only a small proportion of households may be in the position to sell an apartment and thus benefit from higher residential property prices. From the point of view of monetary policy, the conclusion from this paper is that the monetary authorities cannot rely on the wealth channel when estimating the impacts of monetary policy on household consumption. However, our finding that monetary policy does have a significant impact on asset prices may have important implications if the wealth channel exists in other parts of the Chinese economy. For example, fixed asset investment – which covers nearly half of China's GDP – may follow asset prices closely, which could also mean that the wealth channel would work in this regard. For future work, it would be essential to explore what kinds of links exist between monetary policy, asset prices and fixed asset investment in China. This further illumination would also be important from the point of view of the recent economic developments in China. The country announced a vast stimulus package in autumn 2008 to keep the economy on a stable growth path in the aftermath of the international financial crisis. As part of the stimulus policies, the monetary policy stance was dramatically loosened and in fact the majority of the stimulus policies and related investment projects were financed by bank credit. As a result, Chinese banks’ credit stock at the end of 2009 was 30% larger than a year earlier. Naturally, such a pronounced economic stimulus raised questions about negative side effects. In particular, the rapid recovery of the Chinese stock markets in the summer of 2009 was connected to the rapid credit growth, and later on the Chinese authorities became concerned about price increases in the real estate market.22 Even though these recent events are not part of the data set used in this study, our analysis confirms that monetary policy can cause substantial movements in asset prices. Thus, if future work can find that these movements in asset prices do have an impact on, for example, fixed asset investment developments, the wealth channel has to be taken carefully into account when deciding upon monetary policy in China.