Can China Grow Faster? A Diagnosis on the Fragmentation of the Domestic Capital Market

 
Author/Editor: Wei, Shang-Jin ; Boyreau-Debray, Genevieve
 
Publication Date: May 01, 2004
 
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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 examines possible segmentation of the internal capital market in China. We employ two standard tools from the international finance literature to analyze financial integration across Chinese provinces. Both tests confirm a similar (and somewhat surprising) picture: capital mobility within China is low! Furthermore, the degree of internal financial integration appears to have decreased, rather than increased, in the 1990s relative to the preceding period. Finally, we document that the government tends to reallocate capital from more productive regions to less productive ones. In this sense, a smaller role of the government in the financial sector might increase the rate of economic growth.
 
Series: Working Paper No. 04/76
Subject(s): Capital markets | China | Capital flows | Financial sector | Economic growth | China, People's Republic of

Author's Keyword(s): Chinese economy | internal capital market | financial integration | Feldstein-Horioka | risk sharing
 
English
Publication Date: May 01, 2004
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA0762004 Pages: 45
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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