Title: The contribution of financial liberalisation to rapid economic growth in China (1995-2005)

Authors: Robert K. McCleery; Fernando De Paolis

Addresses: Monterey Institute of International Studies, 460 Pierce St., Monterey, CA 93940, USA. ' Monterey Institute of International Studies, 460 Pierce St., Monterey, CA 93940, USA

Abstract: China's reported economic growth since 1979 has surpassed all sustained performances in recorded history. We ask how China's financial system changed and how large a role financial liberalisation played in China's growth over the 1995-2005 period, in part to contribute to the debate regarding China's long-term, sustainable growth rate. After separately estimating the comparative static effects of interest rate decontrol, improved efficiency of capital allocation, and foreign capital inflows as a result of financial liberalisation in a computable general equilibrium model, we conclude, conservatively, that 1.5 to 2 percentage points of China's annual growth rate of almost 10% is attributable to financial liberalisation.

Keywords: China; financial liberalisation; sustainable growth; CGE modelling; economic growth; interest rate decontrol; capital allocation; foreign capital inflows; computable general equilibrium.

DOI: 10.1504/IJEBR.2012.049535

International Journal of Economics and Business Research, 2012 Vol.4 No.6, pp.719 - 737

Published online: 25 Nov 2014 *

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