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Does the Chinese Banking System Promote the Growth of Firms?

Author

Listed:
  • Panicaos Demetriades

    (University of Leicester)

  • Jun Du

    (Aston University)

  • Sourafel Girma

    (University of Nottingham)

  • Chenggang Xu

    (London School of Economics)

Abstract

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

Suggested Citation

  • Panicaos Demetriades & Jun Du & Sourafel Girma & Chenggang Xu, 2008. "Does the Chinese Banking System Promote the Growth of Firms?," WEF Working Papers 0036, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    • Handle: RePEc:wef:wpaper:0036
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    References listed on IDEAS

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    Cited by:

    1. Abdullahi Ahmed & Andrew Hulten, 2014. "Financial Globalization in Botswana and Nigeria: A Critique of the Thresholds Paradigm," The Review of Black Political Economy, Springer;National Economic Association, vol. 41(2), pages 177-203, June.
    2. Chenggang Xu, 2012. "Comment on "China's Financial System: Opportunities and Challenges"," NBER Chapters,in: Capitalizing China, pages 143-145 National Bureau of Economic Research, Inc.
    3. Xiaoqiang Cheng & Hans Degryse, 2010. "The Impact of Bank and Non-Bank Financial Institutions on Local Economic Growth in China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 37(2), pages 179-199, June.
    4. Laura Capera & Andrés Murcia Pabón & Dairo Estrada, "undated". "Efectos de los Límites a las Tasas de Interés sobre la Profundización Financiera," Temas de Estabilidad Financiera 057, Banco de la Republica de Colombia.
    5. Chandra, Piyush & Long, Cheryl, 2013. "Anti-dumping Duties and their Impact on Exporters: Firm Level Evidence from China," World Development, Elsevier, vol. 51(C), pages 169-186.
    6. Lin, Justin Y. & Sun, Xifang & Wu, Harry X., 2015. "Banking structure and industrial growth: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 131-143.

    More about this item

    Keywords

    Chinese banking system development; value added and TFP growth; panel dataset;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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