The Open Economics Journal

2008, 1 : 14-24
Published online 2008 May 23. DOI: 10.2174/1874919400801010014
Publisher ID: TOECONSJ-1-14

China’s State-Owned Banks’ Lending Practices, 1994-2005: Empirical Tests and Policy Implications

Richard C. K. Burdekin and Ran Tao
Robert Day School of Economics and Finance, Claremont McKenna College, 500 E. Ninth Street, Claremont, California 91711, USA.

ABSTRACT

More than half of the assets in China’s banking system are accounted for by four huge state-owned commercial banks. This paper examines the changing factors influencing these banks’ lending behavior over the post-1994 period on a province-by-province basis. Determinants include the concentration of state-owned enterprises, the level of provincial prosperity, deposit levels, and macroeconomic control variables. We confirm a downward trend in the banks’ loan-todeposit ratio combined with some (mixed) evidence of more lending to richer provinces over time. SOE lending remained important for at least one of the four banks.

Keywords:

Chinese banks, lending, state-owned enterprises.