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Drivers of bank loan growth in China: government or market?

Author

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  • Xiaohong Chen

    (Birkbeck, University of London)

  • Paul Wohlfarth

    (Birkbeck, University of London)

Abstract

This paper investigates China's banking system in a post-crisis environment, 2008-2018, focusing on determinants of bank lending. We use a panel of 14 Chinese listed banks, for which there is data over this period. We group these 14 banks into various bank-clusters, classified by ownership and systemic importance. Possible determinants of loan growth are divided into two sets of variables: bureaucratic variables and economic variables. We find that for individual banks and bank groups bureaucratic variables are very significant and the economic variables have comparatively little influence, which is consistent with the state retraining quite a lot of control. However, pooling of the data gives evidence for the influence of economic variables. The size of the coefficients is similar to the average of the individual banks but they are now significant, reflecting the larger sample size. Thus the pooled estimates are more supportive of the role of bankspecific market forces in determining loan growth.

Suggested Citation

  • Xiaohong Chen & Paul Wohlfarth, 2019. "Drivers of bank loan growth in China: government or market?," BCAM Working Papers 1909, Birkbeck Centre for Applied Macroeconomics.
    • Handle: RePEc:bbk:bbkcam:1909
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    File URL: https://eprints.bbk.ac.uk/30079/1/30079.pdf
    File Function: First version, 2019
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    Cited by:

    1. Bofinger, Peter & Geißendörfer, Lisa & Haas, Thomas & Mayer, Fabian, 2023. "Credit as an instrument for growth: A monetary explanation of the Chinese growth story," W.E.P. - Würzburg Economic Papers 107, University of Würzburg, Department of Economics.

    More about this item

    Keywords

    Loan growth; Listed banks; Bureaucratic effects; Market effects; China;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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