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From financial repression to financial crisis? The case of China

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  • Guangdong Xu
  • Binwei Gui

Abstract

This study explores the connections between financial repression policies and the possibility of financial crisis, a relationship that has been overlooked in previous literature. We focus on China, a country with one of the highest levels of financial repression in the world. China's case shows that when financial repression is maintained at a modest level, as the government did before 2008, the possibility of a financial crisis is low; however, when financial repression policies are pushed to an excessive level, as the government did after 2008, the national asset‐liability structure may be damaged to such an extent that a financial crisis becomes likely. The key to understanding the changing role of China's financial repression policies lies in the survival strategy of the Chinese party‐state, which regards finance as a powerful weapon and is eager to use it to address certain economic, political, or social problems that may endanger its rule.

Suggested Citation

  • Guangdong Xu & Binwei Gui, 2019. "From financial repression to financial crisis? The case of China," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 33(1), pages 48-63, May.
    • Handle: RePEc:bla:apacel:v:33:y:2019:i:1:p:48-63
    DOI: 10.1111/apel.12249
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    Cited by:

    1. Duc Hong Vo & Anh The Vo & Chi Minh Ho, 2020. "Does Financial Integration Enhance Economic Growth in China?," Economies, MDPI, vol. 8(3), pages 1-18, August.
    2. Bayari, Celal, 2020. "The Neoliberal Globalization Link to the Belt and Road Initiative: The State and State-Owned-Enterprises in China [alternative title: Bilateral and Multilateral Dualities of the Chinese State in the C," MPRA Paper 104471, University Library of Munich, Germany, revised 21 Jul 2020.
    3. Guangdong Xu & Binwei Gui, 2021. "The non‐linearity between finance and economic growth: a literature review and evidence from China," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(1), pages 3-18, May.

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