SOEs as intermediation: Leakage effect under financial repression

Zhiyong Yao (), Dingwei Gu and Wen Cao

Pacific-Basin Finance Journal, 2019, vol. 53, issue C, 349-361

Abstract: This article sheds new light on the puzzle why and how China's economy and private sector can grow so remarkably despite serious financial repression and credit control. We show that there exists a “leakage effect”: State-owned enterprises borrow from banks with the official interest rate, and then relend their loans to private firms with the (black) market interest rate. When doing so, all parties involved are better off, and the inefficiency of financial repression is mitigated.

Keywords: Relending activities; Financial repression; Leakage effect; Informal financing (search for similar items in EconPapers)
JEL-codes: G21 G28 O16 O17 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:53:y:2019:i:c:p:349-361

DOI: 10.1016/j.pacfin.2018.12.001

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