Growth-Financial Intermediation Nexus in China

November 1, 2002

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Jahangir Aziz, and Christoph Duenwald. Growth-Financial Intermediation Nexus in China, (USA: International Monetary Fund, 2002) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the relationship between economic growth and financial development in China during the post-1978 reform period. Recent studies, based on cross-country data, have found a positive association between these two variables. We find that while a positive correlation between growth and financial intermediation exists in China, the association is more apparent than real. The nonstate sector, which contributed most to China's remarkable growth during this period, did not use the domestic financial system in any substantial way for financing. The same appears to be true for the faster-growing provinces. Compared to foreign investment, domestic private credit played a relatively small, although statistically significant, role in financing the nonstate sector and fast-growing provinces.

Subject: Balance of payments, Bank credit, Banking, Credit, Domestic credit, Financial markets, Financial sector development, Foreign direct investment, Money

Keywords: Bank credit, Bank lending, Credit, Domestic credit, Financial intermediation, Financial sector development, Financing China's growth, Foreign direct investment, GDP, Growth, Investment environment, Lending, Loan-to-GDP ratio, Per capita income, Provincial differences, Sector bank credit, State bank, WP

Publication Details

Pages:

16
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/194
Stock No:

WPIEA1942002
ISBN:

9781451859874
ISSN:

1018-5941

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