A Tale of Two Sectors: Financialization and Wealth Accumulation in China

• In Event: 30620 - Section on Inequality, Poverty, and Mobility Roundtables
  In Refereed Roundtable (60 minute): Table 6: Race, Class, and Wealth Inequality

Abstract

This paper examines the impact of financialization on household wealth accumulation in China, highlighting the role of the country’s socialist legacy. Using panel data from the China Household Financial Survey (CHFS), we find a significant net worth advantage enjoyed by employees in the state sector, with little differentiation between industries. In the non-state sector, employees in highly financialized industries, such as finance, real estate, and information technology, experience higher wealth compared to other industries. However, these advantages do not fully offset the wealth gap between non-state and state sector workers. We also find a tighter link between income and wealth in the non-state sector, partially explaining the divergent accumulation patterns. This suggests that the state sector’s institutional legacy insulates employees from market-driven inequalities, while the non-state sector is more exposed to financialization’s effects, shaping distinct pathways of wealth inequality in contemporary China.

Authors

• Xiaoguang Fan

• Junchao Tang, University of Michigan-Ann Arbor