In late February, the People's Bank of China conducteda survey on urban household savings in about 50 cities various sizes. Therewere 20,000 valid responses. The following is the summary of the surveyresults.

 

1.    The current income of urbanhouseholds grew steadily and people were optimistic about their future income.

 

Thesurvey shows that, compared to the previous quarter, the current index ofincome sentiment of urban households was 17.8, up 5.6. Among the surveyed, 26.3percent, an increase of 4.3 percentage points, considered their incomeincreased; 8.5 percent, a decrease of 1.3 percentage points, considered theirincome reduced. The households' future income confidence index was 16.8, a jumpof 2.1. Among those surveyed, 23.2 percent expected their income to increaseand 6.4 percent expected a decrease.

 

2.        Thehouseholds' satisfaction over current price level was low and householdexpectations of future price development was less optimistic.

 

According to the survey, the households' satisfactionindex for current price level was 2.9, the second lowest except that of theprevious quarter. 18 percent of the surveyed considered the price level "ratherhigh and not acceptable," 61.1 percent considered it "relatively high, but acceptable,"and 20.9 percent considered it "satisfactory". With regard to householdexpectations of future price development, 31.4 percent surveyed expected pricesto rise next quarter while 60.3 percent anticipated they would remain unchangedand 8.3 percent foresaw a decline.

 

3.        Thehouseholds' willingness to consume weakened, but the enthusiasm for purchasingcars and homes was buoyant.

 

The survey shows a drop in households' willingness toconsume. At the present level of prices and interest rate, only about 30.8percent surveyed considered consumption (including through borrowing) the "mostsensible" choice, representing a drop of 2.3 percentage points from theprevious quarter and down by 1.4 percentage points year-on-year, close to thehistorical low of 30.7 percent in the third quarter of 2003. Even though theinclination to consume was weak, households' enthusiasm for car and homepurchase has been on steady rise. The survey shows that households planning to buy cars and housing in thecoming quarter reached to 10.4 percent and 21.4 percent respectively, up 0.7and 0.2 percentage points compared to those of the previous quarter, or ayear-on-year increase of 1.4 and 0.1 percentage points.

 

4.        The urbanhouseholds' willingness to save was stable; investments in stocks were pickingup as the market rebounded and mutual funds were gaining popularity.

 

The survey shows, at the current level of prices andinterest rate, 11.4 percent of the households chose to invest in stocks ormutual funds, up 5.4 percentage points compared to the previous quarter or 5.8percentage points year-on-year, marking the highest level since the thirdquarter of 2001. Although the households surveyed showed encouraging enthusiasmfor investing in the stock market and mutual funds, their appetite for savingsremained unaffected. According to the survey, at present 34.7 percent ofhouseholds chose to save more, down 1.1 percentage points from the previousquarter or 0.6 percentage points from a year earlier, remaining at a highlevel.