Browsing by Subject "E02"

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  • Song, Zheng (Michael); Xiong, Wei (2018)
    BOFIT Discussion Papers 1/2018
    Published in Annual Review of Financial Economics, Vol. 10, 2018, 261-286
    Motivated by growing concerns about the risks and instability of China’s financial system, this article reviews several commonly perceived financial risks and discusses their roots in China’s politico-economic institutions. We emphasize the need to evaluate these risks within China’s unique economic and financial systems, in which the state and non-state sectors coexist and the financial system serves as a key tool of the government to fund its economic policies. Overall, we argue that: (1) financial crisis is unlikely to happen in the near future, and (2) the ultimate risk lies with China’s economic growth, as a vicious circle of distortions in the financial system lowers the efficiency of capital allocation and economic growth and will eventually exacerbate financial risks in the long run.