How Does the Composition of Asset Portfolios Affect Household Consumption: Evidence from China Based on Micro Data

To pursue sustainable and balanced economic development, it is urgent to transform the economic development models from investment-driven to consumption-led. Factors underlying the consumption pattern of households in China, especially the rising wealth and its impact, deserve special attention from both policy makers and academic researchers. This paper aims to investigate how asset portfolios, consisting of housing asset, financial asset, production asset, durable asset, and vehicle asset affect consumption behavior based on household panel data. It is proved that the composition of asset portfolios significantly affects consumption of households. Asset levels and asset prices have positive influences on household consumption. Furthermore, various household assets have different impacts on household consumption patterns, divided into living type, developing type, and enjoying type of consumption, especially there is a larger wealth effect on developing type of consumption. More importantly, it shows a pattern of urban and rural dual economic structure. The disparity is even higher from a wealth perspective. The availability to wealth is of great importance. Therefore, the findings suggest inclusive financial reforms to create conditions for promoting property income and facilitating financial capacity of households, which is necessary for policy formation of Chinese economic transition.