The Economy of China and Local Population

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Stocks and risk factors

China has the second-largest economy in the world. However, even for the economic superpower, it is not easy to deal with all the challenges created by the coronavirus pandemic. Unfortunately, the local population especially, the poorest part is struggling to cope with the ongoing situation.

As a result, demand for consumer loans continues to increase in China, especially among the poorest households. The coronavirus that emerged in Wuhan, reached all parts of the country. Hopefully, the country’s government was able to contain the spread of the virus. Nevertheless, the road to recovery is full of challenges, as China is still trying to recover from the economic shock of weeks-long shutdowns.

According to the official as well as third-party data that China’s poorest households experienced bigger problems, compared with other parts of the society. Importantly, in the first quarter of 2020, prices rose more in rural areas than in cities.

It is worth mentioning that, the average monthly salary of migrant workers, fell nearly 8% to about $525. According to economists, millions of migrant workers had not returned to work by the end of last month.

The economic pressure forced many people to take loans. Thus, economic pressure led to a greater demand for loans. However, it is less clear if people can get them. A survey conducted by the Survey and Research Center for China Household Finance revealed many interesting details.

Local economy and poorest householdsWorld’s second-largest economy

The Research Center for China Household Finance belongs to the Southwestern University of Finance and Economics. According to this survey conducted by this center, the poorest households those making less than 50,000 yuan ($7,214) or less a year reported the highest level of loan demand.

For example, compared with the fourth quarter of 2019, the corresponding index rose from 100 to 110.5 in the first quarter of 2020.

Interestingly, the study was conducted from February 21 to March 10. Moreover, 30,688 respondents took part in this study. They participated through Alipay. As a reminder, Alipay is a mobile payment application that belongs to Alibaba-affiliate Ant Financial.

Also, the poorest respondents reported the greatest challenges when it comes to getting loans. Moreover, compared with the last quarter of 2019, the index fell from 100 to 90.5 in the first quarter of this year.

One of the solutions to help the poorest households in the country is to introduce a targeted cash payout. China’s Ministry of Finance should give three-month cash subsidies to households. The purpose of such subsidies is to help people who have been unable to get back to work. The country’s government has enough financial resources to provide financial assistance. This step will help to boost the local economy.

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