Working Paper
Financial Sector Development and Growth

The Chinese Experience

This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid central-planning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.