IDEAS home Printed from
   My bibliography  Save this paper

The Financial Deepening-Productivity Nexus in China: 1987-2001


  • Zhang, Jun
  • Wan, Guanghua
  • Jin, Yu


The financial intermediation-growth nexus is a widely studied topic in the literature of development economics. Deepening financial intermediation may promote economic growth by mobilizing more investments, and lifting returns to financial resources, which raises productivity. Relying on provincial panel data from China, this paper attempts to examine if regional productivity growth is accounted for by the deepening process of financial development. Towards this end, an appropriate measurement of financial depth is constructed and then included as a determinant of productivity growth. It finds that a significant and positive nexus exists between financial deepening and productivity growth. Given the divergent pattern of financial deepening between coastal and inland provinces, this finding also helps explain the rising regional disparity in China.

Suggested Citation

  • Zhang, Jun & Wan, Guanghua & Jin, Yu, 2007. "The Financial Deepening-Productivity Nexus in China: 1987-2001," WIDER Working Paper Series 008, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2007-08

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Jeremy Bulow & Kenneth Rogoff, 2005. "Grants versus Loans for Development Banks," American Economic Review, American Economic Association, vol. 95(2), pages 393-397, May.
    2. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    3. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    4. Hulya Ulku & Tito Cordella, 2004. "Grants Versus Loans," IMF Working Papers 04/161, International Monetary Fund.
    5. Silvia Marchesi & Alessandro Missale, 2004. "What does motivate lending and aid to the HIPCs?," Development Working Papers 189, Centro Studi Luca d'Agliano, University of Milano.
    6. Cohen, Daniel, 2001. "The HIPC Initiative: True and False Promises," International Finance, Wiley Blackwell, vol. 4(3), pages 363-380, Winter.
    7. Reisen, Helmut & Soto, Marcelo, 2001. "Which Types of Capital Inflows Foster Developing-Country Growth?," International Finance, Wiley Blackwell, vol. 4(1), pages 1-14, Spring.
    8. Devesh Kapur, 2002. "Do as I Say Not as I Do: A Critique of G-7 Proposals on Reforming the MDBs," Working Papers 16, Center for Global Development.
    9. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
    10. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
    11. Lisa CHAUVET & Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY & Pierre JACQUET & Bertrand SAVOYE, 2003. "Attenuating through Aid the Vulnerability to Price Shocks," Working Papers 200325, CERDI.
    12. Ratha, Dilip, 2001. "Complementarity between multilateral lending and private flows to developing countries : some empirical results," Policy Research Working Paper Series 2746, The World Bank.
    13. Matthew Odedokun, 2004. "Multilateral and Bilateral Loans versus Grants: Issues and Evidence," The World Economy, Wiley Blackwell, vol. 27(2), pages 239-263, February.
    14. Rodrik, Dani, 1995. "Why is there Multilateral Lending?," CEPR Discussion Papers 1207, C.E.P.R. Discussion Papers.
    15. Sanjeev Gupta & Benedict Clements & Emanuele Baldacci & Carlos Mulas-Granados, 2004. "The persistence of fiscal adjustments in developing countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 209-212.
    16. Reisen, Helmut & von Maltzan, Julia, 1999. "Boom and Bust and Sovereign Ratings," International Finance, Wiley Blackwell, vol. 2(2), pages 273-293, July.
    17. Robert Powell, 2003. "Debt Relief, Additionality, and Aid Allocation in Low Income Countries," IMF Working Papers 03/175, International Monetary Fund.
    18. Nunnenkamp, Peter & Thiele, Rainer & Wilfer, Tom, 2005. "Grants versus loans: Much ado about (almost) nothing," Kiel Economic Policy Papers 4, Kiel Institute for the World Economy (IfW).
    19. Louise Young, 2002. "Determining the Discount Rate for Government Projects," Treasury Working Paper Series 02/21, New Zealand Treasury.
    20. Odedokun, Matthew, 2003. "Economics and Politics of Official Loans versus Grants Panoramic Issues and Empirical Evidence," WIDER Working Paper Series 004, World Institute for Development Economic Research (UNU-WIDER).
    21. Iman Sugema & Anis Chowdhury, 2005. "Aid and Fiscal Behaviour in Indonesia: The case of a lazy government," Centre for International Economic Studies Working Papers 2005-06, University of Adelaide, Centre for International Economic Studies.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    2. Zhang, Jun, 2008. "China?s Economic Growth: Trajectories and Evolving Institutions," WIDER Working Paper Series 033, World Institute for Development Economic Research (UNU-WIDER).
    3. Iftekhar Hasan & Haizhi Wang & Mingming Zhou, 2009. "Do better institutions improve bank efficiency? Evidence from a transitional economy," Managerial Finance, Emerald Group Publishing, vol. 35(2), pages 107-127, January.

    More about this item


    growth; financial development; productivity; China;

    JEL classification:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:rp2007-08. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mauricio Roa Grisales). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.