State-owned enterprises and entrusted lending: economic growth and business cycles in China
State-owned enterprises and entrusted lending: economic growth and business cycles in China
A key economic structure in China is the co-existence of state-owned enterprises (SOEs) being bank-favored firms as well as policy tools, and more productive private firms who can borrow from SOEs through entrusted lending. We explore macroeconomic implications of such a structure in China. Our findings suggest SOEs dampen output volatility at the cost of productivity volatility. In contrast, the healthy development of entrusted lending dampens variations of both output and productivity by reallocating credits between firms. Focusing on the recent growth slowdown in China, we further show conducive effects of entrusted lending on economic growth by mitigating capital misallocation.
DSGE, financial friction, resource allocation, shadow lending, SOEs
Zhang, Shuonan
093a5840-cc2a-4306-9eff-522daca9a79f
21 August 2023
Zhang, Shuonan
093a5840-cc2a-4306-9eff-522daca9a79f
Zhang, Shuonan
(2023)
State-owned enterprises and entrusted lending: economic growth and business cycles in China.
Economic Inquiry.
(doi:10.1111/ecin.13174).
Abstract
A key economic structure in China is the co-existence of state-owned enterprises (SOEs) being bank-favored firms as well as policy tools, and more productive private firms who can borrow from SOEs through entrusted lending. We explore macroeconomic implications of such a structure in China. Our findings suggest SOEs dampen output volatility at the cost of productivity volatility. In contrast, the healthy development of entrusted lending dampens variations of both output and productivity by reallocating credits between firms. Focusing on the recent growth slowdown in China, we further show conducive effects of entrusted lending on economic growth by mitigating capital misallocation.
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Economic Inquiry - 2023 - Zhang
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Accepted/In Press date: 28 July 2023
e-pub ahead of print date: 21 August 2023
Published date: 21 August 2023
Keywords:
DSGE, financial friction, resource allocation, shadow lending, SOEs
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Local EPrints ID: 481797
URI: http://eprints.soton.ac.uk/id/eprint/481797
ISSN: 0095-2583
PURE UUID: af7895d0-fa17-4fec-962c-35129cbf0a3c
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Date deposited: 08 Sep 2023 16:31
Last modified: 31 Oct 2023 03:14
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Author:
Shuonan Zhang
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