Investigating the Factors Influencing Household Financial Vulnerability in China: An Exploration Based on the Shapley Additive Explanations Approach

The increasingly observable financial vulnerability of households in emerging market countries makes it imperative to investigate the factors influencing it. Considering that China stands as a representative of emerging market economies, analyzing the factors influencing household financial vulnerability in China presents great reference significance for the sustainable development of households in emerging market countries. Using data from the China Household Finance Survey (CHFS) household samples, this paper presents the regional distribution of households with financial vulnerability in China. Utilizing machine learning (ML), this research examines the factors that influence household financial vulnerability in China and determines the most significant ones. The results reveal that households with financial vulnerability in China takes up a proportion of more than 63%, and household financial vulnerability is lower in economically developed coastal regions than in medium and small-sized cities in the central and western parts of China. The analysis results of the SHAP method show that the debt leverage ratio of a household is the most significant feature variable in predicting financial vulnerability. The ALE plots demonstrate that, in a household, the debt leverage ratio, the age of household head, health condition, economic development and literacy level are significantly nonlinearly related to financial vulnerability. Heterogeneity analysis reveals that, except for household debt leverage and insurance participation, the key characteristic variables exerting the most pronounced effect on financial fragility differ between urban and rural households: household head age for urban families and physical health status for rural families. Furthermore, digital financial inclusion and social security exert distinct impacts on financial vulnerability, showing significantly stronger effects in high per capita GDP regions and low per capita GDP regions, respectively. These findings offer valuable insights for policymakers in emerging economies to formulate targeted financial risk mitigation strategies—such as developing household debt relief and prevention mechanisms and strengthening rural health security systems—and optimize policies for household financial health.