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Schumpeter in practice: The role of credit for industrial policy in China

Author

Listed:
  • Lisa Geissendoerfer
  • Thomas Haas

Abstract

Since the late 1970s, the Chinese government has been undertaking major efforts in developing their countries economy by means of industrial policy. However, a more narrow approach to industrial policy has been pursued only since 2010, with the initiation of the 'Strategic Emerging Industries' program. China's state-dominated banking system is seen as playing a vital role in the financing of these endeavors. Based on a self-constructed data set originating from Chinese official statistics, we show in this paper that (1) there is generally a positive relationship between credit provision to the corporate sector and GDP growth in China, (2) this relationship is non-linear in terms of Chinese regions and credit-to-GDP ratio, and (3) that industrial policy targeting could have led to more investment and GDP growth, however, there are differences among industries and firm types. We thus show that the Chinese economic model could be seen as a practical implementation of Schumpeter's growth theory.

Suggested Citation

  • Lisa Geissendoerfer & Thomas Haas, 2022. "Schumpeter in practice: The role of credit for industrial policy in China," FMM Working Paper 85-2022, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:fmmpap:85-2022
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    File URL: http://www.boeckler.de/pdf/p_fmm_imk_wp_85_2022.pdf
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    Citations

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    Cited by:

    1. Bofinger, Peter & Geißendörfer, Lisa & Haas, Thomas & Mayer, Fabian, 2023. "Credit as an instrument for growth: A monetary explanation of the Chinese growth story," W.E.P. - Würzburg Economic Papers 107, University of Würzburg, Department of Economics.

    More about this item

    Keywords

    Bank-led Growth; Industrial Policy; China; Strategic Emerging Industries; Finance-growth nexus; Finance; Economic growth; Economic development; Bank credit;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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