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Countrys Monetary Frameworks
Countrys Monetary Frameworks
The long-run and the short-run pass-through from the policy rates to
retail lending rates became faster and more complete after interest
rate liberalization. China’s financial system reform has successfully
enhanced the competition level of its banking sector. China’s
Implications/Outcomes/Goals
interest rate liberalization does not negatively affect monetary policy
(lending and deposit rates)
transmission. In contrast, it was found that after liberalization the
mark-up is lower, the long-run interest rate pass-through is more
complete and the short-run pass-through is faster and more
complete.
To Which Sector/Firm
Descriptions (How is policy Bank lending is the main external source of business funding in
formulated and China, accounting for around 59 per cent of total funding. It is
implemented) particularly important for private firms because they tend to have
less access to capital markets than SOEs. There are no up-to-date
official data on bank lending to the private sector, but proxies can be
used to make broad-based assessments of the cost and availability
of bank credit. This article takes firm ownership as classified by
WIND Information, where SOEs include only wholly state-funded
firms.
Proxies for loan growth indicate that it became more difficult for
private firms to obtain bank funding in 2018. MSE data are often
used as a proxy for the private sector, including by the authorities,
since MSEs tend to be privately owned. In 2016, lending to MSEs
accounted for around half of outstanding loans to private firms. A
survey on loan demand published by the People's Bank of China
suggests that MSEs' demand for bank credit actually increased over
this period, implying the fall in lending was primarily driven by
supply factors, consistent with the regulatory tightening. State-
owned banks may face incentives to lend to state firms which could
impede the ability of private firms to access bank funding. Since
2019, loan growth to MSEs has increased, particularly following the
outbreak of COVID-19.
http://www.chinacentric.com/financing-a-china-company.html
https://www.rba.gov.au/publications/bulletin/2020/sep/private-sector-financial-conditions-in-
china.html
https://www.ifc.org/wps/wcm/connect/d644e015-7f4a-418f-aa3a-
a775a7692c7e/china_private_ent_FullReport.pdf?MOD=AJPERES&CVID=j1lpM1b