The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes

Chen, Zhuo; He, Zhiguo; Chun, Liu

doi:10.2139/ssrn.2920030

Cited by 24 publications

(23 citation statements)

References 50 publications

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“…The results can be found inTables A2 and Table A3of the Appendix 15. As is expected, the coefficients on the first lags are generally much larger and have larger p-values than those on the second and third lags 16. In the factor analysis, the estimated weights on liquidity, capital adequacy ratio, profitability ratio and bad loan ratio are 0.835, 0.952, -0.112 and -0.866, respectively.…”

supporting

confidence: 57%

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The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data

Xue

Yilmazkuday

Taylor

2020

Journal of International Money and Finance

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This paper investigates the effects of Chinese financial and fiscal policies designed to counter the worldwide Great Recession of 2008. We examine how policies designed to increase bank credit and health (i.e., asset liquidity, capital adequacy ratio, profitability, and bad loan ratio) influenced firm-level output, employment and investment. We also explore the impact of China's expansionary fiscal policy with regard to these firm-level variables. We find that the policy effects varied based on firm-level characteristics such as size, liability ratio, profitability, ownership and the industry in which the firm operates. With respect to the dynamic effects, our results suggest that Chinese financial and fiscal policies were generally effective in the short run, but their positive impacts ceased within two years.

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supporting

confidence: 57%

“…15 Since, as mentioned above, liquidity, capital adequate ratio, profitability and bad loan ratio have strong correlations with each other, we employ a factor analysis to construct one index titled banking health ratio (HEA) in the regression model. 16 Table 2 shows that As a whole, the results reported in Table 2…”

Section: Dynamic Panel Regression Resultsmentioning

confidence: 83%

The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data

Xue

Yilmazkuday

Taylor

2020

Journal of International Money and Finance

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“…As we discussed before, local government financing vehicles (LGFVs) continued to grow after the stimulus program ended in 2010 and needed to pay back their bank loans. Chen, He, and Liu (2017) argue that the rollover pressure precipitated the rapid growth of the shadow banking system, through which LGFVs were able to roll over their debt. 17 See Hachem (2017) for more detailed reviews on the growing literature on China's shadow banking and Zhu (2017) for an analysis on its welfare implications.…”

Section: Financial Institutionsmentioning

confidence: 99%

Risks in China’s Financial System

Song¹,

Xiong²

2018

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Motivated by growing concerns about the risks and instability of China's financial system, this article reviews several commonly perceived financial risks and discusses their roots in China's politico-economic institutions. We emphasize the need to evaluate these risks within China's unique economic and financial systems, in which the state and non-state sectors coexist and the financial system serves as a key tool of the government to fund its economic policies. Overall, we argue that: (1) financial crisis is unlikely to happen in the near future, and (2) the ultimate risk lies with China's economic growth, as a vicious circle of distortions in the financial system lowers the efficiency of capital allocation and economic growth and will eventually exacerbate financial risks in the long run.

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“…Our decision-makers are listed Chinese corporations, which operate in a highly levered economic system (Xiong (2018); Song and Xiong (2018); Hachem and Song (2016); Chen, He, and Liu (2017)). Business groups often use intra-group transfers to allocate resources from public companies to private related parties (e.g., Berkman, Cole, and Fu (2009); Jia, Shi, and Wang (2013); Gopalan, Nanda, and Seru (2007)).…”

Section: Introductionmentioning

confidence: 99%

Punish One, Teach A Hundred: The Sobering Effect of Punishment on the Unpunished

2019

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The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes

Cited by 24 publications

References 50 publications

The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data

The impact of China’s fiscal and monetary policy responses to the great recession: An analysis of firm-level Chinese data

Risks in China’s Financial System

Punish One, Teach A Hundred: The Sobering Effect of Punishment on the Unpunished

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