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Sun Qi: The Real Effects of Entrusted Lending in China

[Published]: 2019-05-22[Source]: [Browsing]:

SpeakerSun Qi (Associate Professor, School of Finance, Shanghai University of Finance and Economics

DescriptionI develop a two-sector equilibrium model of shadow bank lending in China, in which firms with privileged access to credit provide entrusted loans to firms with limited access to credit. I show that given the initial distorted between-sector allocation of bank loans, entrusted lending can improve the capital allocation by channelling funds toward more productive rms. However, for the allocation of new bank credit injected into the economy, the existence of entrusted lending could amplify the misallocation, through the lender’s interest rate arbitrary behavior. I also conduct counterfactual exercises to examine the allocation effects of credit policies during the period 2009-2012. I quantify the size of the crowding out effect induced by the partial liberalization of the state sector’s borrowing constraint.

TimeMay 31,2019 (Friday)14:00-1530

VenueShahe NO.1 Building, room 201