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Does Financial Liberalization Change the Sectoral Allocation of Investments? Macro Evidence from Chinese Provinces

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  • Qichun He
  • Meng Sun

Abstract

Does financial liberalization affect how investment funds are allocated to competing sectors? We address this question using macro-level panel data for the period of reforms in the Chinese provinces, measuring the sectoral allocation of investments as the ratios of short-term bank loans allocated to agriculture, industry, and commerce, respectively, to total short-term loans. Both least square dummy variables (LSDV) and system estimations using the generalized method of moments (GMM) suggest that financial reform has a significant positive effect on the share of short-term loans allocated to agriculture and a significant negative effect on the share of short-term loans allocated to industry.

Suggested Citation

  • Qichun He & Meng Sun, 2013. "Does Financial Liberalization Change the Sectoral Allocation of Investments? Macro Evidence from Chinese Provinces," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S2), pages 6-22, March.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:s2:p:6-22
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    Cited by:

    1. Si, Deng-Kui & Li, Xiao-Lin & Huang, Shoujun, 2021. "Financial deregulation and operational risks of energy enterprise: The shock of liberalization of bank lending rate in China," Energy Economics, Elsevier, vol. 93(C).

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