The relationship between finance and growth in China

K.C. Chen, Lifan Wu and Jian Wen

Global Finance Journal, 2013, vol. 24, issue 1, 1-12

Abstract: We examine the non-linearity between financial development and economic growth in China. Specifically, we use a threshold model to investigate whether provinces with high level of personal income can exploit financial development efficiently. Empirical analysis, using cross-provincial data from 1978 to 2010, shows that finance has a strong positive influence on growth in high-income provinces, but a strong negative impact on growth in low-income provinces. The results are robust to an alternative financial development measure. Furthermore, we find that China's state sector, notorious for inefficiency and low productivity, accounts for a large proportion of industrial output in low-income provinces, causing bank loans to have a negative impact on economic growth.

Keywords: China; Financial development; Economic growth; Threshold regression (search for similar items in EconPapers)
JEL-codes: O16 O40 O53 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:24:y:2013:i:1:p:1-12

DOI: 10.1016/j.gfj.2013.03.006

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