China‘s strong economic performance and its financial development outcomes are extremely difficult to reconcile with the dominant verdict that its financial system is seriously inefficient. Using an evolutionary perspective as a metaphor, this essay offered suggestions that adaptive efficiency criteria may help solve the apparent puzzle. An adaptive efficiency criterion offers conceptual as well as methodological approaches to resolving this puzzle and contradiction. The essay‘s discussions reveal that much of what critics cite as intermediation inefficiencies –non performing loans, directed credit allocation– are, in fact, a dissipative energy generating required spillovers fuelling the entire system. From this perspective, the essay argues that the relevant evaluation criterion for the Chinese financial system would be ―adaptive efficiency, instead of the conventional allocative one. This arises since China is an emerging economic system characterized primarily by state-owned financial institutions and whose goals are developmental.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
7241.
Find related papers by JEL classification: O1 - Economic Development, Technological Change, and Growth - - Economic Development P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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