Financial repression in China's agricultural economy
Purpose – The purpose of this paper is to examine whether or not financial repression exists in the saving and investment activities of farm households in rural areas of China. Design/methodology/approach – This paper empirically investigates repression in rural China using the McKinnon-Shaw model and microeconomic data combined with lending and savings rates and ceilings by rural credit cooperatives. Findings – The paper finds only limited evidence of a repression dominated by savings, while investment response appears to be, at least on average, normal or unrepressed. More specifically, the paper finds that the relationship between growth and investment is consistent with an unrepressed economy but savings do show evidence of repression. Originality/value – The political focus of economic reformation in China has been one of rapid economic growth in urban areas and a neglect of the agriculture sector. This focus on urban growth has led some Chinese scholars to speculate that the residual impact is a repressed agricultural and rural economy, at least in the context of McKinnon and Shaw framework. However, such speculations have not previously been verified. This paper presents the first attempt to determine the relationships exclusively in the context of the agricultural economy.
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Volume (Year): 1 (2009)
Issue (Month): 3 (September)
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References listed on IDEAS
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- R McKinnon, 1991. "Financial Control in the Transition to a Market Economy," CEP Discussion Papers dp0040, Centre for Economic Performance, LSE.
- Gelb, Alan & Jefferson, Gary & Singh, Inderjit, 1993. "Can Communist economies transform incrementally? China's experience," Policy Research Working Paper Series 1189, The World Bank.
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- Ronald I. McKinnon, 1991. "Financial Control in the Transition from Classical Socialism to a Market Economy," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 107-122, Fall.
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Khatkhate, Deena R., 1988. "Assessing the impact of interest rates in less developed countries," World Development, Elsevier, vol. 16(5), pages 577-588, May.
- Kapur, Basant K, 1976. "Alternative Stabilization Policies for Less-developed Economies," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 777-95, August.
- Mathieson, Donald J., 1980. "Financial reform and stabilization policy in a developing economy," Journal of Development Economics, Elsevier, vol. 7(3), pages 359-395, September.
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