What Drove Housing Wealth Inequality in China?

Although China is experiencing a deterioration in wealth distribution where housing is playing a dominant role, this issue has received scant research attention despite its importance. Combining four rounds of the China Household Finance Survey (CHFS) data, this paper measures and discusses wealth inequality in China, with a special emphasis on the contribution of housing. Our analysis reveals that housing is the largest contributor to wealth inequality, responsible for around 70 percent of total wealth inequality, and its contribution has been increasing over time. Our research efforts have focused on the housing wealth disparity, exploring its composition from alternative perspectives. The results show that housing wealth inequality has also been rising over time and an absolute majority of housing wealth inequality is due to within-group gaps. Finally, we employ Wan's (2004) regression-based decomposition methodology to quantify the contributions of different determinants to housing wealth disparity in China, and to demonstrate serious biases in the conventional approach that is often used to analyze housing wealth inequality.