China & World Economy / 75–101, Vol. 30, No. 5, 2022
Financial Literacy: The Case of China
Yanna He, Muzaffarjon Ahunov
Abstract
We scrutinized determinants of financial literacy in China – the largest developing economy, and one with a rapidly expanding financial landscape. We used the China Household Finance Survey’s 2013 and 2015 waves, which included the so-called “Big Three” financial literacy questions that test individuals’ understanding of compound interest rates, inflation, and risk. We found that financial literacy in the country was low. Our results showed that, unlike in developed countries, risk literacy in China was high and financially illiterate people’s awareness of their own lack of financial skills was high. Importantly, we showed that female, old, less educated, and low-income people were increasingly lagging in gaining financial skills. This was especially true for the western and central regions of China. Our study complements a limited number of studies on the financial literacy of the middle class in developing economies.