Financial Intermediation and Growth : Chinese Style
The author analyzes the relationship between growth and financial intermediation at the sub-national level within China. Does the quality of the banking sector in a province affect its rate of growth? Do state and non-state banking sectors perform...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2003/04/2350351/financial-intermediation-growth-chinese-style http://hdl.handle.net/10986/18229 |
| Summary: | The author analyzes the relationship
between growth and financial intermediation at the
sub-national level within China. Does the quality of the
banking sector in a province affect its rate of growth? Do
state and non-state banking sectors perform differently?
Does the structure of the local banking sector affect the
rate of provincial economic growth? To answer these
questions, the author first uses evidence on the
fragmentation of regional capital markets to justify the
existence of local credit channels. Second, using a dataset
of 26 provinces between 1990 and 1999, she defines and
introduces indicators of local banking development into the
traditional growth regression framework using the GMM-system
estimator. The results suggest that credit extended by the
banking sector at the state level has a negative impact on
provincial economic growth. This negative effect appears to
be attributable to the burden of supporting the state-owned
corporate sector rather than to the poor performance of
state-owned banks. Moreover, provinces with more diversified
banking sectors appear to grow faster. |
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