The Political Economy of State Capitalism and Shadow Banking in China

Kellee Tsai ()
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Kellee Tsai: Division of Social Science, Hong Kong University of Science and Technology

No 2015-25, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies

Abstract: The Xi-Li administration faces the dual challenge of managing state capitalism and shadow banking as China enters a phase of more moderate economic growth. During China's first three decades of reform, private sector development occurred in parallel with prioritization of state-owned enterprises in strategic industries, and growth surged. This pattern of state capitalism rested on an unarticulated bifurcated financing arrangement whereby the formal banking system primarily served public enterprises, while private businesses relied primarily on informal finance. However, China's response to global financial crisis disrupted the preceding equilibrium of financial dualism under state capitalism. Unprecedented expansion of bank lending after 2008 created opportunities for a host of state economic actors- including SOEs, state banks, and local governments—to expand their participation in offbalance sheet activities.

Keywords: China; state capitalism; informal finance; shadow banking; financial development (search for similar items in EconPapers)
JEL-codes: G21 G23 O17 P16 P26 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015-05, Revised 2015-05
New Economics Papers: this item is included in nep-ban, nep-hme, nep-iue, nep-pke, nep-pol and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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