Drivers of bank loan growth in China: government or market?

Xiaohong Chen and Paul Wohlfarth
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Xiaohong Chen: Birkbeck, University of London

No 1909, BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics

Abstract: This paper investigates China's banking system in a post-crisis environment, 2008-2018, focusing on determinants of bank lending. We use a panel of 14 Chinese listed banks, for which there is data over this period. We group these 14 banks into various bank-clusters, classified by ownership and systemic importance. Possible determinants of loan growth are divided into two sets of variables: bureaucratic variables and economic variables. We find that for individual banks and bank groups bureaucratic variables are very significant and the economic variables have comparatively little influence, which is consistent with the state retraining quite a lot of control. However, pooling of the data gives evidence for the influence of economic variables. The size of the coefficients is similar to the average of the individual banks but they are now significant, reflecting the larger sample size. Thus the pooled estimates are more supportive of the role of bankspecific market forces in determining loan growth.

Keywords: Loan growth; Listed banks; Bureaucratic effects; Market effects; China (search for similar items in EconPapers)
JEL-codes: C32 E51 P34 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-ban, nep-cna, nep-fdg, nep-mac and nep-tra
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https://eprints.bbk.ac.uk/30079/1/30079.pdf First version, 2019

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