China's Credit Plan: An Overview

Montes-Negret, Fernando

doi:10.1093/oxrep/11.4.25

Cited by 14 publications

(6 citation statements)

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“…The structural break dates for growth are in line with the country's gradual approach to privatisation (1988, 1990) and the restructuring of state‐owned enterprises exercise (1992). The structural break for financial depth in 1992–93 coincides with the government's adoption of a 16‐point programme credit plan which imposes individual credit ceilings on specialised banks (Montes‐Negret, ). The structural break date in 2005 could be linked to the start of the property bubble in both commercial and real estate in the country.…”

Section: Methodology and Empirical Findingsmentioning

confidence: 99%

The income inequality, financial depth and economic growth nexus in China

2019

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Income inequality has increased in China despite rapid economic growth. Income inequality could impinge on future development, leading to social tension or political instability. Our study investigates the short‐run and long‐run relationship between three important macroeconomic indicators—income inequality, economic growth and financial depth. We utilise a two‐step procedure of ARDL bounds and Granger causality for the analysis. The bounds test indicates the presence of a cointegrating relationship between income inequality, financial depth and economic growth in the long run. In the second step, we utilise the Granger causality approach. Results show a bidirectional causality between financial depth‐growth and a unidirectional causality between inequality‐growth in the short run. In the long run, results reveal that growth and financial depth determine Gini. Our findings provide support for the inequality‐widening effect due to economic growth and higher credit provided to the private sector. We find no evidence of inequality‐narrowing or income‐equalising effect in the long run for the period of study. It is possible that the government's inclusive growth policies which started less than a decade ago have not taken effect for us to capture the inverted U‐shape income equalising effect significantly.

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Section: Methodology and Empirical Findingsmentioning

confidence: 99%

The income inequality, financial depth and economic growth nexus in China

2019

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“…The PBC set the quantitative bank-specific loan quotas, which were precise lending ceilings for individual financial institutions, and provided liquidity to those banks, which then allocated credit to governmentpreferred subsectors and projects (see Montes-Negret 1995). Banks adjusted their lending activities to meet the loan quotas.…”

Section: Institutional Backgroundmentioning

confidence: 99%

“…However, this direct control over the lending quantity of individual banks led to a mismatch between credit supply and demand, hindering the efficient allocation of credits. Furthermore, with the new development of financing sources other than bank credits, the relationship between the credit plan and real GDP became less predictable (see Montes-Negret 1995 Dickinson and Liu (2007) present an in-depth discussion on how monetary policy affects the real economy in China during this transition period. 8 According to the PBC, monetary aggregates are M0 (currency in circulation), M1 (sum of M0 plus demand deposits) and M2 (the sum of M1 plus savings and time deposits) (see PBC 's Annual Report 2007).…”

Section: Institutional Backgroundmentioning

confidence: 99%

Does monetary policy matter in China? A narrative approach

Sun

2013

China Economic Review

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“…As the only low-risk vehicle available for savings in the economy, it offers an extremely low real rate of return on bank deposits. In addition, about 80% of the bank loans were extended to the state sector in the early 1990's (Montes-Negret, 1995). By charging interest rates well below market clearing levels on the bank loans, the banking system actually subsidizes government investment projects and the loss-incurring state-owned enterprises.…”

Section: Credit Control and Interest Rate Regulationmentioning

confidence: 99%