Social capital, finance, and consumption: Evidence from a representative sample of Chinese households

Using a sample of Chinese households, we study how a type of social capital, private social networks, affects access to credit and its implications for consumption. We find a strong and likely causal link between private social networks, use of informal credit, and household consumption. Informal credit via private social networks facilitates household consumption especially for households that experienced a recent health shock, that face financial constraints, and that do not have access to formal finance, and the effects are more pronounced in poor regions and rural areas.