Banking structure and economic growth: Evidence from China

Justin Lin () and Xifang Sun ()
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Xifang Sun: Seoul National University, Seoul 151¨C747, Korea;

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2009, vol. 4, issue 4, 479-504

Abstract: With panel data for 28 Chinese provinces (autonomous regions, municipalities) during 1985–2002, this paper assesses the effect of banking structure on economic growth. Banking structure is defined as the relative importance of banks of different size in the banking sector. The market share of small banking institutions is taken as a proxy to measure the banking structure. In dealing with the potential endogeneity problem, this paper constructs an instrumental variable for banking structure with the information on the commercialization reform of state-owned banks initiated in 1994. The estimation results from a two-way fixed-effect model show that increases in the market share of small banking institutions enhance economic growth in contemporary China.

Keywords: optimal financial structure; banking structure; economic growth (search for similar items in EconPapers)
JEL-codes: G21 L11 O43 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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Journal Article: Banking structure and economic growth: Evidence from China (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:6:y:2009:i:4:p:479-504

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