SOEs as intermediation: Leakage effect under financial repression

Quid pro quo

“…This argument is examined by Banerjee (1997). 5 For more and specific institutional background in China financial area during the past three or four decades, please see Yao, Gu, and Cao (2019). 6 Lu, Thangavelu, and Hu (2005) find evidence that the systematic lending bias is partly induced by the expectation of government's bailout of troubled SOEs, such as takeover of non-performing loans or restructuring of ailing SOEs.…”

“…19 These two re‐lending channels are essential intermediaries for PFs when state‐owned banks reject them. Yao et al (2019) show that all parties involved in this re‐lending process are better off, and inefficiency caused by financial repression is mitigated.…”

“…It has expanded steadily at a rate of 20% annually since the beginning of the reform and opening‐up in the late 1970s, far above the economy's 8% average growth for the same period. From almost nothing, the private sector has now accounted for more than 60% of China's GDP, while the state sector's share has dropped from about 80% in 1978 to less than 30% (Allen, Qian, & Qian, 2005; Tsai, 2002; Yao, Gu, and Cao, 2019). However, for example, in the financial area, the government had almost monopolized the financial resources for most of the reform and open‐up period 5 .…”

“…5 5 For more and specific institutional background in China financial area during the past three or four decades, please see Yao, Gu, and Cao (2019). …”

Three essays on connections and corporate governance: Evidence from China

“… Since 1998, the government has explicitly allowed banks to lend to private companies. Despite this permission, in 2009 the share in value of bank loans given to private enterprises only amounted to 1.78%(Yao et al, 2019) Lardy (2019). notes that over the period of 2010-2013 private firms received more new bank loans than did state-owned enterprises.…”