The contribution of financial liberalisation to rapid economic growth in China (1995-2005)

Robert K. McCleery and Fernando De Paolis

International Journal of Economics and Business Research, 2012, vol. 4, issue 6, 719-737

Abstract: China's reported economic growth since 1979 has surpassed all sustained performances in recorded history. We ask how China's financial system changed and how large a role financial liberalisation played in China's growth over the 1995-2005 period, in part to contribute to the debate regarding China's long-term, sustainable growth rate. After separately estimating the comparative static effects of interest rate decontrol, improved efficiency of capital allocation, and foreign capital inflows as a result of financial liberalisation in a computable general equilibrium model, we conclude, conservatively, that 1.5 to 2 percentage points of China's annual growth rate of almost 10% is attributable to financial liberalisation.

Keywords: China; financial liberalisation; sustainable growth; CGE modelling; economic growth; interest rate decontrol; capital allocation; foreign capital inflows; computable general equilibrium. (search for similar items in EconPapers)
Date: 2012
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