Credit Allocation and Subsequent Impact of Chinese Banks after the Global Financial Crisis

Chinas bank-dominated financial system is an important support to fuel the development of the real economy and the stable operation of society.This paper attempts to explore the credit decision and subsequent effects of Chinese banks after the 2008 global financial crisis by analyzing multiple sets of microdata.We find that during the implementation of the “Four Trillion” economic stimulus plan,compared with other types of banks,state-owned banks cooperate with the stimulus plan more actively and allocate more credit to the central and western regions,and mainly local state-owned enterprises receive more credit support.However,banks that allocate more loans to the central and western regions during the stimulus period have worse asset quality after the exit of the plan,and this effect persists in the long run.The findings of this paper suggest that the effective implementation of counter-cyclical macroeconomic policies by state-owned banks and state-owned enterprises is an important reason for Chinas rapid stabilization of economy and employment after the crisis,but attention needs to be paid to the medium- and long-term effects associated with financial risks.