The Impact of Market Economy on Individuals’ Financial Behaviors
Huacen (Brin) Xu, Heying Jenny Zhan, Lauren Denise Fannin

Abstract
While small family business is playing a significant role in China’s national economy, little is known about its loan defaults. Using data from a national commercial bank in China (n=925), we examine loan defaults by putting borrowers in familial, social, and cultural contexts. We find:1) age has a significant negative effect on loan defaults; 2) the cohort of 35 to 50 years old are less likely to default. We argue that the drastic shift from socialism to market economy have had a lasting impact on the cohort who entered adulthood during the transaction. Policy discussions and recommendations are presented.

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