IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v57y2019ics1043951x17301529.html
   My bibliography  Save this article

Balance sheet expansion and economic growth in China: Crowd in or crowd out?

Author

Listed:
  • Yuan, Zhigang
  • Rao, Can
  • Shi, Shuangshuang

Abstract

Balance sheet expansion is crucial to understand the historic path, current slowdown and future trend of economic growth in China. As the financial system transforms national savings into investment, balance sheet expands simultaneously. According to changing impacts of balance sheet expansion on real economy, economic growth in China from 1998 to 2016 can be divided into the crowd-in stage and the crowd-out stage. In the first stage (1998–2007), balance sheet expansion crowded China's real economy in, raised TFP dramatically and accelerated economic growth. In the second stage (2008–2016), balance sheet expansion crowded China's real economy out, with stagnant TFP and decelerated economic growth. Balance sheet expansion has slowed down since 2014, but it continues to exert crowding out effects on China's real economy. We argue that balance sheet expansion is crucial for China's future economic growth. In the long term, structural reforms, especially reforms in the financial system, could increase growth potential significantly. In the short term, financial system reforms should focus on generating sufficient cash flows to boost aggregate demand.

Suggested Citation

  • Yuan, Zhigang & Rao, Can & Shi, Shuangshuang, 2019. "Balance sheet expansion and economic growth in China: Crowd in or crowd out?," China Economic Review, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:chieco:v:57:y:2019:i:c:s1043951x17301529
    DOI: 10.1016/j.chieco.2017.10.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X17301529
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2017.10.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. Xu, Bin & Chen, Jianbao, 2021. "How to achieve a low-carbon transition in the heavy industry? A nonlinear perspective," Renewable and Sustainable Energy Reviews, Elsevier, vol. 140(C).
    2. Liang Liu & Lianshui Li, 2021. "The effect of directed technical change on carbon dioxide emissions: evidence from China’s industrial sector at the provincial level," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 107(3), pages 2463-2486, July.

    More about this item

    Keywords

    Financial system; Assets and liabilities; Real economy;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    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:eee:chieco:v:57:y:2019:i:c:s1043951x17301529. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.