China's Financial System and Economy: A Review

Zhiguo He () and Wei Wei

No 30324, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: China's financial system has been integral to its spectacular economic growth over the past 40 years. We review the recent literature on China's financial system and its connections to the Chinese economy based on the categories of Aggregate Financing to the Real Economy (AFRE), a broad measure of the nation's yearly flow of liquidity accounting for unique features of China's financial system. While early work on China's financial system emphasizes the state-owned enterprise (SOE) reform, the recent literature explores other more market-based financing channels—including shadow banking—that grew rapidly after 2010 and have become important components of AFRE. These new financing channels are not only intertwined with each other, but more importantly often ultimately tied back to the dominant banking sector in China. Understanding the mechanisms behind these channels and their intrinsic connections is crucial to alleviate capital allocation distortion and mitigate potential systemic financial risk in China.

JEL-codes: G10 G20 G30 O16 O17 O33 P34 (search for similar items in EconPapers)
Date: 2022-08
New Economics Papers: this item is included in nep-ban, nep-cna and nep-fdg
Note: CF DEV POL
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Citations: View citations in EconPapers (2)

Published as Zhiguo He & Wei Wei, 2023. "China's Financial System and Economy: A Review," Annual Review of Economics, vol 15(1).

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Journal Article: China's Financial System and Economy: A Review (2023)
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