Has the Chinese Growth Model Changed? A View from the Credit Market

26 Pages Posted: 24 Mar 2012

See all articles by Risto Herrala

Risto Herrala

European Central Bank (ECB) - Directorate General International and European Relations

Yandong Jia

People's Bank of China, Institute of Finance

Date Written: March 22, 2012

Abstract

A cornerstone of the Chinese growth model has been the opening up of its economy to private competition. Some observers claim that China has changed course since joining the WTO by increasingly promoting ‘state capitalism’, the large State Owned Enterprises, thereby compromising a growth model that has served it well. Due to the opaqueness of the Chinese system, even such a major shift in policy has been difficult to verify.

We are able to look inside the covert policy process by studying the credit supply to Chinese listed companies, the drivers of the growth miracle, of the past decade. The econometric analysis corroborates the policy shift: we find a significant improvement in credit supply conditions of government firms relative to other firms during the latter part of the decade. The estimations also provide evidence of other major trends in credit supply that reflect the Chinese government’s policy objectives.

Keywords: Chinese economy, credit constraints, corporate finance

JEL Classification: C58, E44, G30, O16

Suggested Citation

Herrala, Risto and Jia, Yandong, Has the Chinese Growth Model Changed? A View from the Credit Market (March 22, 2012). BOFIT Discussion Paper No. 5/2012, Available at SSRN: https://ssrn.com/abstract=2027433 or http://dx.doi.org/10.2139/ssrn.2027433

Risto Herrala (Contact Author)

European Central Bank (ECB) - Directorate General International and European Relations ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Yandong Jia

People's Bank of China, Institute of Finance ( email )

Beijing
China

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