Anonymous Banking and Financial Repression: How Does China's Reform Limit Government Predation without Reducing Its Revenue?
AbstractMay 31, 1999 China's economic performance of the past two decades presents a puzzle for the economics of transition and development: Enormous private business incentives were unleashed that have fueled rapid economic growth despite the fact that China has had very weak "conventional institutions" (such as the rule of law and separation of powers) to constrain the government from arbitrary intrusion into economic activities. We argue that one mechanism that has limited the government's ability for predation and harassment is commitment through information decentralization, where the key institution is "anonymous banking," that is, a combination of the use of cash for transactions and the use of anonymous savings deposits. Meanwhile, the government has benefitted from the improved private incentives by collecting quasi-fiscal revenues from the state banking system through "financial repression," a combination of controls on international capital flows with restrictions on domestic interest rates. We show that the major features of China's economy concerning its fiscal decline, financial deepening, and the sectoral dual-track can be better understood using this analytical framework.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stanford University, Department of Economics in its series Working Papers with number 99014.
Date of creation: 31 May 1999
Date of revision:
Contact details of provider:
Postal: Ralph Landau Economics Building, Stanford, CA 94305-6072
Web page: http://www-econ.stanford.edu/econ/workp/
More information through EDIRC
Other versions of this item:
- Bai, Chong-En & Li, David Daokui & Qian, Yingyi & Wang, Yijiang, 1999. "Anonymous Banking and Financial Repression: How Does China's Reform Limit Government Predation without Reducing Its Revenue?," CEPR Discussion Papers 2221, C.E.P.R. Discussion Papers.
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-07-19 (All new papers)
- NEP-CDM-1999-07-19 (Collective Decision-Making)
- NEP-DEV-1999-07-19 (Development)
- NEP-PUB-1999-07-19 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dewatripont, M & Maskin, E, 1995.
"Credit and Efficiency in Centralized and Decentralized Economies,"
Review of Economic Studies,
Wiley Blackwell, vol. 62(4), pages 541-55, October.
- Mathias Dewatripont & Eric Maskin, 2004. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9605, ULB -- Universite Libre de Bruxelles.
- Mathias Dewatripont & Eric Maskin, 1995. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9603, ULB -- Universite Libre de Bruxelles.
- Brennan,Geoffrey & Buchanan,James M., 2006.
"The Power to Tax,"
Cambridge University Press, number 9780521027922, December.
- Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
- Gary S. Becker & Casey B. Mulligan, 1998.
"Deadweight Costs and the Size of Government,"
NBER Working Papers
6789, National Bureau of Economic Research, Inc.
- Gary S. Becker & Casey B. Mulligan, 1998. "Deadweight Costs and the Size of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 144, Chicago - Center for Study of Economy and State.
- Yao, Yang & Yueh, Linda, 2009. "Law, Finance, and Economic Growth in China: An Introduction," World Development, Elsevier, vol. 37(4), pages 753-762, April.
- Eckaus, R. S., 2003. "Some consequences of fiscal reliance on extrabudgetary revenues in China," China Economic Review, Elsevier, vol. 14(1), pages 72-88.
- Yingyi Qian, 2002. "How Reform Worked in China," William Davidson Institute Working Papers Series 473, William Davidson Institute at the University of Michigan.
- Yingyi Qian, 1999. "The Institutional Foundations of China's Market Transition," Working Papers 99011, Stanford University, Department of Economics.
- Huang, Yasheng, 2005. "Ownership biases and FDI in China: two provinces," Working papers 4537-04, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Ahrens, Joachim & Jünemann, Patrick, 2010. "Transitional institutions, institutional complementarities and economic performance in China: A 'Varieties of Capitalism' approach," Discourses in Social Market Economy 2010-11, OrdnungsPolitisches Portal (OPO).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.