TY  - JOUR
AU  - Boyreau-Debray,Genevieve
AU  - Wei,Shang-Jin
TI  - Pitfalls of a State-Dominated Financial System: The Case of China
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11214
PY  - 2005
Y2  - March 2005
UR  - http://www.nber.org/papers/w11214
L1  - http://www.nber.org/papers/w11214.pdf
N1  - Author contact info:
Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall, Room 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - State-owned financial institutions have been proposed as a way to address market failure, but the recent literature has also highlighted their pathological problems. This paper studies the case of China for pitfalls of a state-dominated financial system, including possible segmentation of the internal capital market due to local government interference and mis-allocation of capital. Even without formal legal prohibition to capital movement across regions, we find that capital mobility within China is low. Furthermore, to the extent some capital moves around the country, the government (as opposed to the private sector) tends to allocate capital systematically away from more productive regions toward less productive ones. In this context, a smaller role of the government in the financial sector might increase economic efficiency and the rate of economic growth.
ER  -