The Impacts of Financial Literacy on Chinese Financially Excluded Households’ Retirement Planning Behaviors

In this paper, I am using the data from the 2013 Chinese Household Finance Survey (CHFS) to explore the impacts of financial literacy on Chinese households' retirement planning and the demand for commercial insurances, especially among the financial excluded/vulnerable subpopulations (rural, illiterate and migrant), in China. I find improving financial literacy could help Chinese households be more prepared for retirement. The households with higher objective financial literacy score and paid more attention to financial information are more likely to have retirement plan, and they are also more likely to have diversified ways to support financial life after retirement. In addition, annual household disposable income, family net assets, gender, age, age squared, family size, number of children, health condition etc. are found to be significant factors to explain how Chinese households choose different ways to support their lives after retirement. Rural and illiterate households are more dependent on saving and child support after retirement, while urban and literate households are more likely to rely on social pension plan and retirement pay after retirement. Rural residents and migrants are more vulnerable, concerning the social pension system coverage. Trustiness of commercial pension plan is the important determinant whether Chinese households are willing to buy commercial insurance and commercial pension plans, and which can be improved by means of increasing financial knowledge and paying more attention to financial information