Banking reform and economic development in post-1978 China : towards a synthesis of competing theoretical perspectives

• Main Author: Jiang, Yingquan
• Published: SOAS, University of London 2015
• Subjects: 330
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.665097

This thesis presents a detailed analysis of China's banking reforms and their interactive relationship with economic development, starting in 1978. Developing a synthesized analytical framework, this thesis examines and verifies the applicability and feasibility of several competing theoretical perspectives within the Chinese context. These include the aspects of monetization, financial liberalization, allocative efficiency view of finance (according to the neoclassical doctrine), and productive efficiency view of finance (from the Keynesian-Schumpeterian view of endogenous credits creation). This thesis argues that these perspectives consider only one dimension of China's financial development, and that such a generalized view is unsuitable. Additionally, as China's transitional economy still has strong market-supplanting attributes, studying China's financial development and its interactive role with real sector development post-1978 from a purely neoliberal, market-criteria lead to bias and distortion. This thesis investigates China's evolving financial reform primarily from the aspects of monetization, financial liberalization, and functional view of finance. It emphasizes the interactions between the function of resources allocation, which draws on the existence of market frictions found in the mainstream doctrine, and the function of credit creation, found in the post-Keynesian endogenous finance theory of development. This thesis undertakes both a qualitative and quantitative analysis of China's financial sector. This thesis finds that it is the complementarity of the productive efficiency and the allocative efficiency that explains the seemingly confusing phenomenon that an inefficient financial system, according to purely commercial criteria, has successfully supported China's economic development over the last 30 years.