An Overview of the Impact of Residential Balance Sheet Recession on Consumption

Abstract

In the past two years, China's post-epidemic economic recovery has been weak, and with the general decline in housing and land prices, the balance sheet of the residential sector has been damaged. The macroeconomic level is showing a situation of low growth, low inflation, and low market interest rates, which has triggered concerns in the community about China's "balance sheet recession. " The executive meeting of the State Council on January 28, 2023, pointed out that it is necessary to put “address the outstanding contradiction of insufficient demand, promote the accelerated restoration of consumption “as the main driving force of the economy, to reasonably increase consumer credit. This paper analyzes the current situation of domestic residents' balance sheet and consumption, and finds that domestic residents' balance sheet has already shown signs of "downsizing". In view of this, analysing the impact of residents’ household assets and liabilities on household consumption has certain theoretical and practical significance on how to tap residents’ consumption demand and unleash their consumption potential.