Countercyclical Policy Bank Loans and Economic Stability: Evidence from China’s Listed Firms

Jian Xiong, Wei Yin (), Guangzi Li and Peng Zhou
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Jian Xiong: School of Economics and Management, Southeast University, Nanjing, China
Wei Yin: School of Economics and Management, Southeast University, Nanjing, China
Guangzi Li: Institute of Finance and Banking, Chinese Academy of Social Sciences, Beijing, China

No E2026/11, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper examines the underexplored role of China’s policy bank loans as a countercyclical tool for stabilizing economic fluctuations, complementing conventional fiscal and monetary policies. Utilizing panel data on Chinese listed companies from 2005 to 2023, we demonstrate that policy bank loans effectively mitigate the adverse impacts of economic downturns and ensure corporate value stability during periods of contraction. The research further identifies that the countercyclical effect of these loans is influenced by both internal factors, including political and economic stability and tax revenue growth, as well as external factors such as global financial uncertainty. Additionally, the study highlights the complementary role of policy bank loans alongside conventional stabilization interventions, strengthening the combined capacity to enhance macroeconomic stability.

Keywords: Policy banks; Countercyclical; Listed firms; Economic stability (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2026-08
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Forthcoming in Applied Economics , DOI: 10.1080/00036846.2026.2714938

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