How Much Has Private Credit Lending Reacted to Monetary Policy in China? The Case of Wenzhou
This study investigates empirically what the major factors are which have driven Wenzhouâ€™s informal credit market and how much that market is responsive to monetary policies and the formal banking conditions nationwide. The main findings are: (i) the informal credit lending rates are highly receptive to monetary policies; (ii) the market is dominantly demand driven; (iii) the informal lending is substitutive to bank savings in the short run but complementary to banking lending in the long run; and (iv) the market is complementary to excessive investments in the local real estate market.
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