Summary of Key Points
From 2021 to 2026, the composition of Chinese households' total assets (approximately 730 trillion yuan) underwent a significant shift: the proportion of real estate decreased from 67% to 52%, while deposits rose from 16% to 25%, and other financial assets (such as stocks and funds) increased from 15% to 20%. However, this change was not entirely the result of conscious choices. The decline in the real estate proportion was mainly due to the passive depreciation caused by falling housing prices, and the increase in the proportion of deposits and financial assets was partly forced by market circumstances. The money that was actively moved around did not flow into the stock market but instead went towards "quasi-deposit" products (such as bond funds and dividend insurance). Within the stock market, there was a divergence: ordinary investors traded on their own, while the wealthy invested in private equity, reflecting a trend of both de-institutionalization and increased institutionalization. Families with multiple properties faced the dilemma of being unable to sell their homes, making it difficult for them to diversify their assets. This wealth transfer has just reached its first stop (deposits), and over the next decade, households will need to adapt to a new reality of dealing with both stable returns and market volatility.
The Truth Behind the Asset Shift: Passive Depreciation Outpaces Conscious Choices
Many people assume that people actively replaced their real estate with deposits or financial assets, but this is not the case. The 15-percentage-point decrease in the real estate proportion was largely due to the decline in housing prices. For example, if a house that was originally worth 1 million yuan is now worth 800,000 yuan, the proportion of real estate in total assets would drop from 90% (1 million/1.1 million) to 80% (800,000/1 million) – it's not that people sold their houses and deposited the money in banks; rather, the value of the houses has decreased. The increase in the proportion of deposits and financial assets is partly due to market forces and partly due to conscious decisions. Therefore, this shift from real estate to financial assets is less about a deliberate upgrade and more about a forced adjustment.
Where the Money Went After Leaving Real Estate: Quasi-Deposits as the Preferred Option
The money that was actively moved around did not go into the stock market but instead sought products that offered slightly higher returns while still maintaining liquidity:
- Deposits Remain the Mainstay: Household deposits exceed 140 trillion yuan (100,000 yuan per person), accounting for more than half of financial assets. The proportion of deposits increased by 9 percentage points between 2021 and 2026, faster than other financial assets (which increased by 5 percentage points), indicating that people prioritized liquidity over high returns.
- Quasi-Deposit Products Become Popular: Fixed deposit interest rates fell from 1.95% to 1.25%, prompting people to look for alternatives:
- Bond funds: The only type of fund that saw continuous large-scale net purchases in the first half of the year, with 781.2 billion units bought in the second quarter.
- Dividend insurance: Sold 1 trillion yuan in the first half of the year (more than the total sales for 2025), as it offered both a guaranteed minimum return and potential for higher returns.
- Money market funds: Attracted 1.2 trillion yuan in the first five months.
These products are generally low-risk and offer stable returns, similar to deposits, as people are still hesitant to invest in the higher-risk stock market.
The Split in the Stock Market: Ordinary Investors Trade on Their Own, While the Wealthy Invest in Private Equity
The A-share market saw a doubling in trading volume in the first half of the year, but this was accompanied by a division:
- Ordinary Investors De-Institutionalize: Stock funds experienced net redemptions of 400.5 billion yuan (compared to net purchases in the same period last year), while 20 million new retail accounts were opened. These investors prefer to trade on their own, believing they can make better decisions and focusing on sectors with clear growth potential, such as semiconductors and communications.
- Wealthy Investors Become More Institutionalized: The scale of private equity investments grew by 44.5%, and the stock of non-wide-based ETFs (such as sector-specific ETFs) increased by 60%. High-net-worth individuals are shifting their funds from public funds to private equity to access more professional management.
It's important to note that the outflow from wide-based ETFs (such as the CSI 300 ETF) of 1.85 trillion yuan was not due to retail investors leaving the market but rather the withdrawal of state-backed funds (for example, the Huatai-PineBridge CSI 300 ETF decreased from 439.4 billion yuan to 94.8 billion yuan). This does not reflect the behavior of retail investors.
The Dilemma of Families with Multiple Properties
Chinese urban households average 1.5 properties per household, and those with multiple properties face significant challenges:
- Liquidity Issues: The price of second-hand homes in 100 cities has been declining for 27 consecutive months, and it has become common for properties to remain unsold for half a year. The clearance rate in court auctions is only 23.5% (less than 19% in third- and fourth-tier cities), making houses almost as hard to sell as outdated appliances.
- Depreciation: Housing prices in first-tier cities have stabilized, but those in third- and fourth-tier cities have fallen by more than 7% year-on-year, resulting in further value loss over time.
- Asset Diversification Challenges: Even if they sell their houses, they have limited options for their funds: early repayment of mortgages (with mortgage loans from the six major banks showing negative growth for three years), low-interest deposits, or investment in dividend insurance (with the range of options narrowing).
Most families are stuck at the first step of this process – they cannot sell their houses, and thus cannot proceed with diversifying their assets. In the United States, households were able to diversify their assets after 2008 because they could sell their houses; in China, families with multiple properties are unable to do so.
The Next Decade: Moving from a Era of Stable Returns to One of Volatility
Goldman Sachs predicts that by 2035, the proportions of stocks and insurance in total assets will rise to 11% and 10%, respectively, but this will only happen if the dominance of deposits continues to decline, and funds gradually shift from deposits to quasi-deposits and other forms of equity. Comparing China with the United States and Japan:
- The United States took ten years (2008–2018) to achieve this structural balance, thanks to the role of public funds.
- Japan took thirty years, relying on global diversification of investments.
- China started from a more extreme position (with real estate and deposits accounting for 82% of total assets), and the process has been more passive (due to housing price declines), with a clear divide between ordinary investors trading on their own and the wealthy investing in private equity.
The maturity of 50–75 trillion yuan in fixed deposits in 2026 will be the first major test: will households be able to adapt to a world of market volatility? Currently, 90% of funds are held in deposits, and 10% in quasi-deposits and stocks – no one has a perfect strategy, as there is no absolute "correct" answer.
Over the next decade, the story of household wealth will shift from one of buying property to one of managing and diversifying assets. The focus will shift from fixed assets to liquid assets, from a world of stable returns to one where volatility is the norm. There is no end to this process; the first stop is deposits, and the next step depends on interest rates and people's understanding of financial assets. There is no one-size-fits-all solution; it's all about finding what works best for each individual.
In Conclusion
The financial landscape is already set, and everyone must make their own choices. The era of easily making money through property purchases is over. We must learn to live with market volatility and find a strategy that suits us. There is no standard answer to this transition; the only thing that matters is finding a strategy that works for us.