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China’s Pseudo-Monetary Policy

Review of Finance, Forthcoming

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

Yongheng Deng

National University of Singapore, Business School and the School of Design and Environment; National University of Singapore (NUS) - Department of Real Estate

Randall Morck

National Bureau of Economic Research (NBER); University of Alberta - Department of Finance and Statistical Analysis

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 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

National University of Singapore, Business School and the School of Design and Environment ( email )

4 Architecture Drive
Singapore 117566
Singapore
(65) 6516 8291 (Phone)
(65) 6774 1003 (Fax)

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

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore
(65) 6516 8291 (Phone)
(65) 6774 1003 (Fax)

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

Randall K. Morck (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

Jing Wu

Institute of Real Estate Studies, NUS ( email )

Institute of Real Estate Studies
21 Heng Mui KengTerrace, #04-02
Singapore, 119613
Singapore

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

Institute of Real Estate Studies, Tsinghua University

Heshanheng Building
Tsinghua University
Beijing, 100084
China

Bernard Yin Yeung

National University of Singapore - Business School ( email )

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

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