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The Political Economy of State Capitalism and Shadow Banking in China

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  • Kellee Tsai

    (Division of Social Science, Hong Kong University of Science and Technology
    Division of Political Science, Johns Hopkins University
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

Abstract

The Xi-Li administration faces the dual challenge of managing state capitalism and shadow banking as China enters a phase of more moderate economic growth. During China's first three decades of reform, private sector development occurred in parallel with prioritization of state-owned enterprises in strategic industries, and growth surged. This pattern of state capitalism rested on an unarticulated bifurcated financing arrangement whereby the formal banking system primarily served public enterprises, while private businesses relied primarily on informal finance. However, China's response to global financial crisis disrupted the preceding equilibrium of financial dualism under state capitalism. Unprecedented expansion of bank lending after 2008 created opportunities for a host of state economic actors- including SOEs, state banks, and local governments—to expand their participation in offbalance sheet activities.

Suggested Citation

  • Kellee Tsai, 2015. "The Political Economy of State Capitalism and Shadow Banking in China," HKUST IEMS Working Paper Series 2015-25, HKUST Institute for Emerging Market Studies, revised May 2015.
  • Handle: RePEc:hku:wpaper:201525
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    File URL: http://iems.ust.hk/assets/publications/working-papers-2015/iemswp2015-25.pdf
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    References listed on IDEAS

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    Cited by:

    1. repec:bla:glopol:v:8:y:2017:i::p:42-53 is not listed on IDEAS
    2. Moho Shiraishi & Go Yano, 2022. "The Financial Crisis in 2008, the Stimulus Package, and Distortion of Financial Intermediation in China: A Survival Analysis Approach," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 280-323, June.
    3. Chaowei Wang & Vo Phuong Mai Le & Kent Matthews & Peng Zhou, 2021. "Shadow banking activity and entrusted loans in a DSGE model of China," Manchester School, University of Manchester, vol. 89(5), pages 445-469, September.
    4. Helmut K. Anheier & Robert Falkner & Alanna Krolikowski, 2017. "Brittle China? Economic and Political Fragility with Global Implications," Global Policy, London School of Economics and Political Science, vol. 8(s4), pages 42-53, June.
    5. Zafer ADALI, 2017. "The Properties Of The Shadow Banking In China," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 1.
    6. Maria Csanádi & Ferenc Gyuris & Wanjun Wang, 2020. "Opening up the black box: Interacting subspheres through enterprise entry and exit in China," CERS-IE WORKING PAPERS 2037, Institute of Economics, Centre for Economic and Regional Studies.
    7. Mark Beeson, 2018. "Asia’s leadership deficit and regional crises," Asia Europe Journal, Springer, vol. 16(2), pages 141-154, June.
    8. Jie Wu & Zhenliang Yang & Mengxuan Wu & Hui Huang, 2023. "The Relationship Between College Students' Mobile Phone Addiction and Aggression: A Moderated Mediation Model," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 18(2), pages 1037-1055, April.
    9. Han Miao, 2017. "Twin Peaks Regulation After the Global Financial Crisis: A Reform Model for China?," Asian Journal of Law and Economics, De Gruyter, vol. 8(3), pages 1-30, December.

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    More about this item

    Keywords

    China; state capitalism; informal finance; shadow banking; financial development;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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