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Journal Articles China Economic Review Year : 2006

Development of Financial Intermediation and Economic Growth: The Chinese Experience

Abstract

Using Chinese provincial data from 1985 to 1999 and applying recent GMM techniques developed for dynamic panels, this paper examines how the development of financial intermediation influences China's economic growth during the post-1978 reform period. Our econometric results show that China's financial intermediation development contributes to its rapid economic growth through two channels: first, the substitution of loans for state budget appropriation and second, the mobilization of household savings. Loan expansion, however, does not contribute to growth since loan distribution by financial intermediaries is inefficient. Deep financial sector reform aimed at correcting this inefficiency is desirable, and is expected to sustain China's economic development in the future.
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Dates and versions

hal-00116980 , version 1 (29-11-2006)

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  • HAL Id : hal-00116980 , version 1

Cite

Hao Chen. Development of Financial Intermediation and Economic Growth: The Chinese Experience. China Economic Review, 2006, Vol. 17, n° 4, pp.347-362. ⟨hal-00116980⟩
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