China’s Pseudo-Monetary Policy

Review of Finance, Forthcoming

67 Pages Posted: 4 Mar 2011 Last revised: 20 May 2014

See all articles by Yongheng Deng

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Jing Wu

Institute of Real Estate Studies, NUS; Institute of Real Estate Studies, Tsinghua University

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: May 7, 2011

Abstract

China's recent monetary stimulation has substantially boosted economic. We argue that its efficacy derives from state control over its banking and corporate sectors. Beijing ordered state-owned banks to lend, and they lent. Beijing ordered centrally-controlled state-owned enterprises (SOEs) to invest, and they invested. Our data show much of this investment was highly leveraged purchases of real estate, and rapid land price rises occur where these SOEs are more active buyers. This episode mimics the credit channel for monetary policy, but actually entails internal transfers between arms of the government putting upward pressure on real estate prices.

JEL Classification: E52, G28, G38, O23, R30

Suggested Citation

Deng, Yongheng and Morck, Randall K. and Wu, Jing and Yeung, Bernard Yin, China’s Pseudo-Monetary Policy (May 7, 2011). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1775363 or http://dx.doi.org/10.2139/ssrn.1775363

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison ( email )

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HOME PAGE: http://https://bus.wisc.edu/faculty/yongheng-deng

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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Jing Wu

Institute of Real Estate Studies, NUS ( email )

Institute of Real Estate Studies
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Singapore, 119613
Singapore

HOME PAGE: http://www.ires.nus.edu.sg

Institute of Real Estate Studies, Tsinghua University

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Tsinghua University
Beijing, 100084
China

Bernard Yin Yeung

National University of Singapore - Business School ( email )

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BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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