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China's Non-Performing Bank Loan Crisis: the role of economic rents

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  • Yasushi Suzuki
  • Md. Dulal Miah
  • Jinyi Yuan

Abstract

Various reasons have been put forward to explain the massive accumulation of non-performing loans in China. This paper applies the financial-restraint model as the analytical framework and argues that failure to create sufficient economic rents is the chief reason underlying the current dismal performance of banks. While the formal financial system is less important than the informal system-especially for financing the private enterprises that are playing a crucial role in economic growth-not addressing the non-performing loan crisis in the formal financial system will likely invite an economic slow-down. Copyright © 2008 The Authors.

Suggested Citation

  • Yasushi Suzuki & Md. Dulal Miah & Jinyi Yuan, 2008. "China's Non-Performing Bank Loan Crisis: the role of economic rents," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 22(1), pages 57-70, May.
    • Handle: RePEc:bla:apacel:v:22:y:2008:i:1:p:57-70
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    References listed on IDEAS

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    1. Yasheng Huang, 2006. "Do Financing Biases Matter for the Chinese Economy?," Cato Journal, Cato Journal, Cato Institute, vol. 26(2), pages 287-306, Spring/Su.
    2. Cull, Robert & Xu, Lixin Colin, 2000. "Bureaucrats, State Banks, and the Efficiency of Credit Allocation: The Experience of Chinese State-Owned Enterprises," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 1-31, March.
    3. repec:cto:journl:v:21:y:2001:i:1:p:77-90 is not listed on IDEAS
    4. Huang, Yiping, 2002. "Is meltdown of the Chinese banks inevitable?," China Economic Review, Elsevier, vol. 13(4), pages 382-387, December.
    5. Deepak Lal, 2006. "A Proposal to Privatize Chinese Enterprises and End Financial Repression," Cato Journal, Cato Journal, Cato Institute, vol. 26(2), pages 275-286, Spring/Su.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    Cited by:

    1. Yasushi Suzuki, 2015. "Chinas Industrial Structure Change: Lessons from Japans Financial Slump," Journal of Public Policy & Governance, Research Academy of Social Sciences, vol. 2(1), pages 1-15.
    2. Umar Muhammad & Sun Gang, 2016. "Non-performing loans (NPLs), liquidity creation, and moral hazard: Case of Chinese banks," China Finance and Economic Review, De Gruyter, vol. 5(3), pages 51-75, September.

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