IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/3027.html
   My bibliography  Save this paper

Financial intermediation and growth - Chinese style

Author

Listed:
  • Boyreau-Debray, Genevieve

Abstract

The author analyzes the relationship between growth and financial intermediation at the sub-national level within China. Does the quality of the banking sector in a province affect its rate of growth? Do state and non-state banking sectors perform differently? Does the structure of the local banking sector affect the rate of provincial economic growth? To answer these questions, the author first uses evidence on the fragmentation of regional capital markets to justify the existence of local credit channels. Second, using a dataset of 26 provinces between 1990 and 1999, she defines and introduces indicators of local banking development into the traditional growth regression framework using the GMM-system estimator. The results suggest that credit extended by the banking sector at the state level has a negative impact on provincial economic growth. This negative effect appears to be attributable to the burden of supporting the state-owned corporate sector rather than to the poor performance of state-owned banks. Moreover, provinces with more diversified banking sectors appear to grow faster.

Suggested Citation

  • Boyreau-Debray, Genevieve, 2003. "Financial intermediation and growth - Chinese style," Policy Research Working Paper Series 3027, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3027
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2003/05/30/000094946_03052004111116/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bayoumi, Tamim A. & Rose, Andrew K., 1993. "Domestic savings and intra-national capital flows," European Economic Review, Elsevier, vol. 37(6), pages 1197-1202, August.
    2. Chen, Jian & Fleisher, Belton M., 1996. "Regional Income Inequality and Economic Growth in China," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 141-164, April.
    3. Martin Raiser, 1998. "Subsidising inequality: Economic reforms, fiscal transfers and convergence across Chinese provinces," Journal of Development Studies, Taylor & Francis Journals, vol. 34(3), pages 1-26.
    4. Sylvie Démurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," Asian Economic Papers, MIT Press, vol. 1(1), pages 146-197.
    5. Nicola Cetorelli & Michele Gambera, 2001. "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data," Journal of Finance, American Finance Association, vol. 56(2), pages 617-648, April.
    6. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    7. Park, Albert & Sehrt, Kaja, 2001. "Tests of Financial Intermediation and Banking Reform in China," Journal of Comparative Economics, Elsevier, vol. 29(4), pages 608-644, December.
    8. Chen, Baizhu & Feng, Yi, 2000. "Determinants of economic growth in China: Private enterprise, education, and openness," China Economic Review, Elsevier, vol. 11(1), pages 1-15.
    9. Anuradha Dayal-Gulati & Aasim M. Husain, 2002. "Centripetal Forces in China's Economic Takeoff," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 1-4.
    10. Sandra PONCET, 2002. "Is China Disintegrating? The Magnitude of Chinese Provinces' Domestic and International Integration," Working Papers 200205, CERDI.
    11. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    12. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
    13. Iwamoto, Yasushi & van Wincoop, Eric, 2000. "Do Borders Matter? Evidence from Japanese Regional Net Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 241-269, February.
    14. Aart Kraay, 2000. "Household Saving in China," The World Bank Economic Review, World Bank, vol. 14(3), pages 545-570, September.
    15. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    16. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2000. "A New Database on the Structure and Development of the Financial Sector," The World Bank Economic Review, World Bank, vol. 14(3), pages 597-605, September.
    17. A. W. Wood, 1957. "Discussion," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 5(2), pages 62-64, July.
    18. Dekle, Robert, 1996. "Saving-investment associations and capital mobility On the evidence from Japanese regional data," Journal of International Economics, Elsevier, vol. 41(1-2), pages 53-72, August.
    19. Qian, Yingyi & Xu, Chenggang, 1993. "The M-form hierarchy and China's economic reform," European Economic Review, Elsevier, vol. 37(2-3), pages 541-548, April.
    20. Yingyi Qian & Chenggang Xu, 1993. "Why China's economic reforms differ: the M‐form hierarchy and entry/expansion of the non‐state sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(2), pages 135-170, June.
    21. Jian, Tianlun & Sachs, Jeffrey D. & Warner, Andrew M., 1996. "Trends in regional inequality in China," China Economic Review, Elsevier, vol. 7(1), pages 1-21.
    22. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
    23. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    24. Sinn, Stefan, 1992. "Saving-Investment Correlations and Capital Mobility: On the Evidence from Annual Data," Economic Journal, Royal Economic Society, vol. 102(414), pages 1162-1170, September.
    25. Mr. Alun H. Thomas, 1993. "Saving, Investment, and the Regional Current Account: An Analysis of Canadian, British, and German Regions," IMF Working Papers 1993/062, International Monetary Fund.
    26. Gallup, John L. & Sachs, Jeffrey D. & Mellinger, Andrew, "undated". "Geography and Economic Development," Instructional Stata datasets for econometrics geodata, Boston College Department of Economics.
    27. Michelle Clark Neely & David C. Wheelock, 1997. "Why does bank performance vary across states?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 27-40.
    28. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
    29. Mody, Ashoka & Wang, Fang-Yi, 1997. "Explaining Industrial Growth in Coastal China: Economic Reforms . . . and What Else?," The World Bank Economic Review, World Bank, vol. 11(2), pages 293-325, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wei, Shang-Jin & Boyreau-Debray, Genevieve, 2004. "Pitfalls of a State-Dominated Financial System: The Case of China," CEPR Discussion Papers 4471, C.E.P.R. Discussion Papers.
    2. Demurger, Sylvie & Sachs, Jeffrey D. & Woo, Wing Thye & BAO, Shuming & Chang, Gene, 2002. "The relative contributions of location and preferential policies in China's regional development: being in the right place and having the right incentives," China Economic Review, Elsevier, vol. 13(4), pages 444-465, December.
    3. Sylvie Démurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," Asian Economic Papers, MIT Press, vol. 1(1), pages 146-197.
    4. Thomas Gries & Margarete Redlin, 2008. "International Integration and Regional Development in China," WIDER Working Paper Series RP2008-66, World Institute for Development Economic Research (UNU-WIDER).
    5. Qinghua Zhang & Heng-fu Zou, 2012. "Regional Inequality in Contemporary China," Annals of Economics and Finance, Society for AEF, vol. 13(1), pages 113-137, May.
    6. T. Gries & M. Redlin, 2011. "International integration and the determinants of regional development in China," Economic Change and Restructuring, Springer, vol. 44(1), pages 149-177, April.
    7. Pedroni, Peter & Yao, James Yudong, 2006. "Regional income divergence in China," Journal of Asian Economics, Elsevier, vol. 17(2), pages 294-315, April.
    8. Batisse, Cecile, 2002. "Dynamic externalities and local growth: A panel data analysis applied to Chinese provinces," China Economic Review, Elsevier, vol. 13(2-3), pages 231-251.
    9. Jérome Hericourt & Mathilde Maurel, 2006. "A new look at the Feldstein-Horioka puzzle: a European-regional perspective," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 49(2), pages 147-168.
    10. Chan, Kenneth S. & Dang, Vinh Q.T. & Lai, Jennifer T. & Yan, Isabel K.M., 2011. "Regional capital mobility in China: 1978–2006," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1506-1515.
    11. Shang-Jin Wei & Ms. Genevieve Boyreau-Debray, 2004. "Can China Grow Faster? A Diagnosis of the Fragmentation of Its Domestic Capital Market," IMF Working Papers 2004/076, International Monetary Fund.
    12. Jones, Derek C. & Li, Cheng & Owen, Ann L., 2003. "Growth and regional inequality in China during the reform era," China Economic Review, Elsevier, vol. 14(2), pages 186-200.
    13. World Bank, 2005. "China : Integration of National Product and Factor Markets, Economic Benefits and Policy Recommendations," World Bank Publications - Reports 8690, The World Bank Group.
    14. Bihong HUANG & Feng DING, 2009. "Spillover Effect Of Infrastructure And Regional Gap In China," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(2).
    15. Sylviane GUILLAUMONT JEANNENEY & PING HUA & ZHICHENG LIANG, 2006. "Financial Development, Economic Efficiency, And Productivity Growth: Evidence From China," The Developing Economies, Institute of Developing Economies, vol. 44(1), pages 27-52, March.
    16. Guariglia, Alessandra & Poncet, Sandra, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 633-657, December.
    17. Sai Ding & John Knight, 2011. "Why has China Grown So Fast? The Role of Physical and Human Capital Formation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(2), pages 141-174, April.
    18. Celine Bonnefond, 2014. "Growth Dynamics And Conditional Convergence Among Chinese Provinces: A Panel Data Investigation Using System Gmm Estimator," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(4), pages 1-25, December.
    19. Wing Thye Woo and Shuming Bao, 2003. "China: Case study on Human Development Progress towards the Millennium Developmental Goals at the Sub-National Level," Human Development Occasional Papers (1992-2007) HDOCPA-2003-14, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    20. Jinzhao Chen, 2015. "Interprovincial Competitiveness and Economic Growth: Evidence from Chinese Provincial Data (1992–2008)," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 388-414, August.

    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:wbk:wbrwps:3027. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    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.