Financial Governance and Economic Development: Making Sense of the Chinese Experience
PSL Quarterly Review, Vol. 64, No. 258, pp. 267-286, 2011
20 Pages Posted: 4 Oct 2011
Date Written: October 4, 2011
Despite fundamental market reforms, the Chinese financial system has remained a mixed system. From the perspectives of the mainstream doctrines of financial liberalization, this system is easily judged to be entailing serious allocative inefficiencies. Nevertheless, from alternative theoretical perspectives, the system might have been conducive to promoting productive efficiency. This paper argues that the actual experience does seem to indicate that, hitherto, the gains in productive efficiency have more than compensated for the losses in allocative efficiency. This judgement helps to make sense of the Chinese anomaly that a seemingly inefficient financial system has co-existed with the outstanding performance of financial deepening and economic development over the past three decades.
Keywords: Chinese banks, market reforms, economic development
JEL Classification: G21, N65, O16
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