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From financial repression to financial crisis? The case of China
Author(s) -
Xu Guangdong,
Gui Binwei
Publication year - 2019
Publication title -
asian‐pacific economic literature
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.232
H-Index - 21
eISSN - 1467-8411
pISSN - 0818-9935
DOI - 10.1111/apel.12249
Subject(s) - financial repression , china , financial crisis , finance , government (linguistics) , politics , geography of finance , state (computer science) , financial system , business , psychological repression , economics , financial regulation , economic policy , political science , interest rate , macroeconomics , linguistics , philosophy , algorithm , computer science , law , gene expression , biochemistry , chemistry , gene
This study explores the connections between financial repression policies and the possibility of financial crisis, a relationship that has been overlooked in previous literature. We focus on China, a country with one of the highest levels of financial repression in the world. China's case shows that when financial repression is maintained at a modest level, as the government did before 2008, the possibility of a financial crisis is low; however, when financial repression policies are pushed to an excessive level, as the government did after 2008, the national asset‐liability structure may be damaged to such an extent that a financial crisis becomes likely. The key to understanding the changing role of China's financial repression policies lies in the survival strategy of the Chinese party‐state, which regards finance as a powerful weapon and is eager to use it to address certain economic, political, or social problems that may endanger its rule.