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The China Development Bank Model - An Incomplete Narrative of a Fragile Property and Banking System

Author

Listed:
  • Bryane Michael
  • Simon Zhao

    (University of Hong Kong)

Abstract

The China Development Bank model seems foolproof. Have a government development bank finance property and infrastructure, hold shares in those investments, and watch the revenues come in. Yet, the model creates particularly risky economic structures -- which we characterise as Bubble Economies. The macroeconomics of such Bubble Economics (as we stylize it) make economies like China fragilized by the model susceptible to crashes which other economies do/would not experience. We show the way the banking, construction, savings-investment, and equities markets interact with local government - resulting in our self-stylized Bubble Economics in a Bubble Economy.

Suggested Citation

  • Bryane Michael & Simon Zhao, 2022. "The China Development Bank Model - An Incomplete Narrative of a Fragile Property and Banking System," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 12(1), pages 1-14.
    • Handle: RePEc:afj:journ3:v:12:y:2022:i:1:p:1-14
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-rdfin_v12_n1_a1
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    More about this item

    Keywords

    China Development Bank Model; China recession; bubble economics; five sector model; government property purchases;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • G01 - Financial Economics - - General - - - Financial Crises

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