Banking Deregulation and Macroeconomic Impact in China: A Theoretical Analysis and Implications of WTO Accession to the Mainland and Hong Kong
AbstractSince the beginning of 1990s, the credit balance of the banking system in mainland China has experienced a big swing from negative to positive. The balance has continued to expand up to now. It seems that both negative and positive credit balances are so large that the financial resources have been utilized inefficiently by the banking system. On the eve of China¡¦s accession to the World Trade Organization (WTO), challenges from banking competition will increase. In this paper a three-sector equilibrium model of monopolistic banking competition is set up and is applied to analyze the impact of the expanding credit balances and banking reform on the Chinese economy. Through theoretical analysis, reasons for the expanding credit balance are provided and some possible solutions are given. China's accession to the WTO will present many challenges to the state-owned banks. Foreign banks will be allowed to compete directly with Chinese local banks. We found that competition will not only promote China's GDP, investment, consumption and deposits as well as bring benefits to consumers, but also provide the banking sector from Hong Kong with new opportunities.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 082002.
Length: 44 pages
Date of creation: Apr 2002
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More information through EDIRC
banking competition; WTO; China; Hong Kong;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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