Growth-Financial Intermediation Nexus in China

Author/Editor: Aziz, Jahangir ; Duenwald, Christoph
Publication Date: November 01, 2002
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper studies the relationship between economic growth and financial development in China during the post-1978 reform period. Recent studies, based on cross-country data, have found a positive association between these two variables. We find that while a positive correlation between growth and financial intermediation exists in China, the association is more apparent than real. The nonstate sector, which contributed most to China's remarkable growth during this period, did not use the domestic financial system in any substantial way for financing. The same appears to be true for the faster-growing provinces. Compared to foreign investment, domestic private credit played a relatively small, although statistically significant, role in financing the nonstate sector and fast-growing provinces.
Series: Working Paper No. 02/194
Subject(s): Economic growth | China | Financial systems | China, People's Republic of

Author's Keyword(s): Growth | financial intermediation | provincial differences
Publication Date: November 01, 2002
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1942002 Pages: 16
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