Bank Lending Constraints in China and Their Real Impacts

, University of 黑料传送门 Booth

, Stanford GSB

This study investigates how regulations on bank lending impact the real economy. China has long implemented a loan quota and loan-deposit ratio system to control bank lending to the private sector. However, the conflicts between genuine market demand for credit and lending constraints triggered the emergence of various forms of "lending in the shadow", especially the ones involving Banker’s Acceptance contracts. We propose to exploit an unexpected policy change in China in 2012 regarding the use of Banker's Acceptance contracts, and combine data on bank loans and firm operations, in order to identify the impact of this policy shock on bank lending behavior and firm performance. The questions we explore include how bank lending responds to policy shocks, how loan-deposit ratio rule and loan quota system fare as macro policy tools, and how lending constraints impact the real economy.

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