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Financial intermediation and growth - Chinese style

  • Boyreau-Debray, Genevieve
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    The author analyzes the relationship between growth and financial intermediation at the sub-national level within China. Does the quality of the banking sector in a province affect its rate of growth? Do state and non-state banking sectors perform differently? Does the structure of the local banking sector affect the rate of provincial economic growth? To answer these questions, the author first uses evidence on the fragmentation of regional capital markets to justify the existence of local credit channels. Second, using a dataset of 26 provinces between 1990 and 1999, she defines and introduces indicators of local banking development into the traditional growth regression framework using the GMM-system estimator. The results suggest that credit extended by the banking sector at the state level has a negative impact on provincial economic growth. This negative effect appears to be attributable to the burden of supporting the state-owned corporate sector rather than to the poor performance of state-owned banks. Moreover, provinces with more diversified banking sectors appear to grow faster.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3027.

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    Date of creation: 30 Apr 2003
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    Handle: RePEc:wbk:wbrwps:3027
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    4. Nicola Cetorelli & Michele Gambera, 1999. "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data," Center for Financial Institutions Working Papers 00-19, Wharton School Center for Financial Institutions, University of Pennsylvania.
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    16. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
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