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Biased Lending and Non-performing Loans in China's Banking Sector

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  • Ding Lu
  • Shandre Thangavelu
  • Qing Hu

Abstract

This article uses a panel data set of public listing companies in China empirically to explore the relationship between banks' lending behaviour and non-performing loans. Our results show that state-owned enterprises (SOEs) got more loans than other firms, other things being equal, and SOEs with high default risks were able to borrow more than the low-risk SOEs and non-SOEs. This suggests that Chinese banks had a systemic lending bias in favour of SOEs, particularly those with high default risks, during the period under investigation. The causes and implications of this behaviour are discussed.

Suggested Citation

  • Ding Lu & Shandre Thangavelu & Qing Hu, 2005. "Biased Lending and Non-performing Loans in China's Banking Sector," Journal of Development Studies, Taylor & Francis Journals, vol. 41(6), pages 1071-1091.
  • Handle: RePEc:taf:jdevst:v:41:y:2005:i:6:p:1071-1091
    DOI: 10.1080/00220380500155361
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    Citations

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    Cited by:

    1. Ying Xu, 2009. "How does financial system efficiency affect the growth impact of FDI in China?," Asia Pacific Economic Papers 383, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    2. repec:eee:riibaf:v:42:y:2017:i:c:p:832-854 is not listed on IDEAS
    3. Shalendra D. Sharma, 2014. "Shadow Banking, Chinese Style," Economic Affairs, Wiley Blackwell, vol. 34(3), pages 340-352, October.
    4. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    5. Hong- Jen Abraham Lin, 2013. "Trends for future integration of commercial banking between Taiwan and China after the ECFA," Chapters,in: Economic Integration Across the Taiwan Strait, chapter 4, pages 81-101 Edward Elgar Publishing.
    6. Zhang, Dayong & Cai, Jing & Dickinson, David G. & Kutan, Ali M., 2016. "Non-performing loans, moral hazard and regulation of the Chinese commercial banking system," Journal of Banking & Finance, Elsevier, vol. 63(C), pages 48-60.
    7. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2012. "Corporate governance and firm value during the global financial crisis: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 70-80.
    8. Trien Le & Amon Chizema, 2011. "State ownership and firm performance: Evidence from the Chinese listed firms," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 2(2).
    9. Wenlang Zhang & Gaofeng Han & Brian Ng & Steven Chan, 2015. "Corporate Leverage in China: Why has It Increased Fast in Recent Years and Where do the Risks Lie?," Working Papers 102015, Hong Kong Institute for Monetary Research.

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