Tests of Financial Intermediation and Banking Reform in China

Albert Park and Kaja Sehrt and Albert Park and Kaja Sehrt
Authors registered in the RePEc Author Service: Albert Park

No 270, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We develop tests of financial intermediation by national banking systems that exploit regional financial and economic data. Derived from a model of bank profit maximization, the tests are based on the expectation that in efficient systems, financial intermediation should not be overly influenced by policy variables; should be greater where projects are more profitable and require greater financing - typically in faster growing, richer, industrial areas; and should direct funds to the best projects regardless of where deposits originate. We apply these tests to Chinese provincial data from 1991-97 for all state banks, the Agricultural Bank of China, rural credit cooperatives, and other financial institutions. China implemented a series of widely publicized financial reforms in the mid-1990s designed to improve bank performance. However, descriptive and estimation results suggest that the importance of state bank policy lending (to support SOEs and finance agricultural procurement) has increased, not fallen, during the recent period, and lending does not respond to economic fundamentals. Only the group of smaller, less-regulated financial institutions appear commercially oriented. Despite reforms, significant barriers to efficient inter-regional financial intermediation remain.

Pages: pages
Date: 1999-03-01
New Economics Papers: this item is included in nep-law, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp270.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp270.pdf [302 Found]--> https://wdi.umich.edu/files/Publications/WorkingPapers/wp270.pdf)

Related works:
Journal Article: Tests of Financial Intermediation and Banking Reform in China (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:1999-270

Access Statistics for this paper

More papers in William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109. Contact information at EDIRC.
Bibliographic data for series maintained by WDI ().