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Deposit insurance, bank competition, and corporate lending in China: A loan-level analysis

Author

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  • Chen, Qian
  • Zhan, Xinyu

Abstract

This study focuses on the unique context of China’s deposit insurance (DI) system to investigate how DI affects corporate lending. Using Chinese loan-level data for the period 2013Q1–2019Q4 and difference-in-differences estimation, we show that corporate lending increased and its interest rates decreased after China established the explicit DI system in 2015. Further mechanism analysis provides evidence that DI increases the availability of corporate lending through the underlying channel of stronger bank competition. Moreover, heterogeneity tests show that the relationship between DI and corporate lending is more pronounced among non-state-owned enterprises and only exists in medium- and long-term loans and secured loans. Our conclusions extend the understanding of the economic consequences of DI beyond the banking sector into the real economy, providing novel theoretical and policy insights for evaluating financial safety nets and comprehending bank lending behavior in highly competitive environments.

Suggested Citation

  • Chen, Qian & Zhan, Xinyu, 2026. "Deposit insurance, bank competition, and corporate lending in China: A loan-level analysis," Research in International Business and Finance, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:riibaf:v:89:y:2026:i:c:s0275531926001832
    DOI: 10.1016/j.ribaf.2026.103456
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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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