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Impacts of population aging on bank loan portfolios: Evidence from China

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  • Li, Zeguang
  • Huang, Yuanbiao
  • Hou, Keqiang

Abstract

We investigate the impacts of population aging on bank lending using micro-level data from the Chinese banking industry. We find that an aging population significantly reduces the volume of bank lending. The underlying mechanism driving this trend comes from a reduction in bank deposits and a decline in banks' risk-taking. At the same time, population aging induces a structural change in banks' loan portfolios. Banks are strategically reducing the share of their loan portfolios exposed to the greater risks associated with an aging population; additionally, they utilize cross-regional operations to lessen the adverse effects of aging. The contractionary effect of population aging on bank lending is more pronounced for non-state banks and banks in highly competitive markets. These findings highlight the importance of considering population aging in assessing both the aggregate volume and the structural composition of bank loans.

Suggested Citation

  • Li, Zeguang & Huang, Yuanbiao & Hou, Keqiang, 2024. "Impacts of population aging on bank loan portfolios: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:reveco:v:95:y:2024:i:c:s1059056024004222
    DOI: 10.1016/j.iref.2024.103430
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