Financial Intermediation of Chinese Banks during WTO Transition

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The empirical literature on China's banking sector shows a prevalence of connected lending practices that favor unviable state-owned enterprises (SOEs) while discriminating against productive private enterprises. This paper extends the data to 2005 to investigate whether the integrity of lending policy has improved during recent periods when the government of China allegedly made a significant stride in reforming its banking sector as it prepared for WTO compliance. The paper finds that the response of bank loans to economic fundamentals remains persistently weak (or even strongly negative) while unprofitable SOEs continue to attract bank loans. We also find evidence that suggests the interbank market is highly fragmented, so banks are still limited in lending by their collections of household deposits. These pieces of evidence cast some doubt on the efficacy of recent banking reform.

    Item Description
    Name(s)
    Thesis advisor: Imai, Masami
    Date
    May 01, 2008
    Extent
    71 pages
    Language
    eng
    Genre
    Physical Form
    electronic
    Discipline
    Subject
    Rights and Use
    In Copyright – Non-Commercial Use Permitted
    Digital Collection
    PID
    ir:1178