Growth-Financial Intermediation Nexus in China
November 1, 2002
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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.
Subject: Balance of payments, Bank credit, Banking, Credit, Domestic credit, Financial markets, Financial sector development, Foreign direct investment, Money
Keywords: Bank credit, bank lending, Credit, Domestic credit, financial intermediation, Financial sector development, financing China's growth, Foreign direct investment, GDP, Growth, investment environment, lending, loan-to-GDP ratio, per capita income, provincial differences, sector bank credit, state bank, WP
Pages:
16
Volume:
2002
DOI:
Issue:
194
Series:
Working Paper No. 2002/194
Stock No:
WPIEA1942002
ISBN:
9781451859874
ISSN:
1018-5941
