A Tale of Two Stock Markets

To a packed lunchtime audience, Global Network Assistant Professor of Social Work Minchao Jin questioned the inclusiveness of China’s financial market and offered solutions to enhance financial literacy among lower-income families.

“The financial market is supposed to efficiently distribute resources, but somehow creates more inequality.” Dr. Jin said. As of January 2016, the Chinese stock market had a record of 100 million investors, according to the China Securities Regulatory Commission.

However, based on a 2015 study conducted in Fujian province, Dr. Jin found that in a sample of 250 rural households, 93 percent of them did not own any financial investment products and 42 percent did not even have a bank account.

Dr. Jin stressed that rural households or migrant workers and poor families in urban areas suffer most from financial exclusion, as they are barriered by policy, business, technology and financial illiteracy. At the very least, he said, they should be granted access to basic resources in order to protect their wealth against inflation.

For these financially illiterate groups, “the solution is not easy,” says Dr. Jin. He proposed a solution of establishing supportive institutions to deliver interventions and resources to clients in need of bank cards, payment and transfer services, insurance services and loans in funding personal and family development, such as housing, microenterprise and education.

“The barrier is on both the sides of suppliers and consumers.  Although a grass-root capital cooperative can increase the supply, it still needs the support from the policy level. Also, if policy can give extra incentive to commercial banks, they would be motivated to offer more to the underserved,” Dr. Jin said.

Financial education could be helpful, however, the concept and measure of financial literacy is still unclear for the Chinese population. Ultimately, Dr. Jin proposes additional research to examine the effectiveness and efficiency of financial education (or other financial literacy intervention types), to develop the best intervention method.