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The Financial Deepening-Productivity Nexus in China: 1987-2001

The financial intermediation-growth nexus is a widely studied topic in the literature of development economics. Deepening financial intermediation may promote economic growth by mobilizing more investments, and lifting returns to financial resources, which raises productivity. Relying on provincial panel data from China, this paper attempts to examine if regional productivity growth is accounted for by the deepening process of financial development. Towards this end, an appropriate measurement of financial depth is constructed and then included as a determinant of productivity growth. It finds that a significant and positive nexus exists between financial deepening and productivity growth. Given the divergent pattern of financial deepening between coastal and inland provinces, this finding also helps explain the rising regional disparity in China.
Publisher:
UNU-WIDER
Series:
WIDER Research Paper
Volume:
2007/08
Title:
The Financial Deepening-Productivity Nexus in China: 1987-2001
Authors:
Jun Zhang, Guanghua Wan, and Yu Jin
Publication date:
February 2007
ISSN Web:
1810-2611
ISBN Web:
9291909475
ISBN 13 Web:
9789291909476
Copyright holder:
© UNU-WIDER
Copyright year:
2007
Keywords:
growth, financial development, productivity, China
JEL:
N1, O5
Project:
Inequality and Poverty in China
Sponsor:
The governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Norway (Royal Ministry of Foreign Affairs), Sweden (Swedish International Development Cooperation Agency-Sida) and the United Kingdom (Department for International Development).
Format:
online