Financial repression and financial risk: the case of China

摘要

Despite more than three decades of economic reform, China's financial repression still remains. Implicit state guarantees continue to be widespread while government interventions are pervasive in almost all economic activities, from determination of bank lending and deposit rates to selective allocation of credit and initial public offering quotas, as well as having majority control of large financial institutions. These financial distortions come with costs which have become heavier over time, particularly after 2008. This paper attempts to provide an integrated perspective in examining how financial repression in China has led to economic imbalances that elevate financial risk, particularly in the midst of ongoing US-China trade tussle and the Covid-19 pandemic.