Can China Grow Faster? A Diagnosis of the Fragmentation of Its Domestic Capital Market

By Shang-Jin Wei, Genevieve Boyreau-Debray

May 1, 2004

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Shang-Jin Wei, and Genevieve Boyreau-Debray. Can China Grow Faster? A Diagnosis of the Fragmentation of Its Domestic Capital Market, (USA: International Monetary Fund, 2004) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines possible segmentation of the internal capital market in China. We employ two standard tools from the international finance literature to analyze financial integration across Chinese provinces. Both tests confirm a similar (and somewhat surprising) picture: capital mobility within China is low! Furthermore, the degree of internal financial integration appears to have decreased, rather than increased, in the 1990s relative to the preceding period. Finally, we document that the government tends to reallocate capital from more productive regions to less productive ones. In this sense, a smaller role of the government in the financial sector might increase the rate of economic growth.

Subject: Bank credit, Capital inflows, Capital markets, Consumption, Financial integration

Keywords: Capital mobility, Investment funds, Saving-investment correlation, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/076
Stock No:

WPIEA0762004
ISBN:

9781451849905
ISSN:

1018-5941

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