Bank concentration and sectoral growth: Evidence from Chinese provinces

- The relationship between sectoral growth and bank concentration is analyzed in China.
- The sample consists of 31 provinces and 8 sectors over the period 2001-2013.
- Two-stage least squares regressions show that bank concentration is harmful to growth for Chinese provinces.
- These findings have important policy implications for policymakers in this period of low growth.

This paper studies the relationship between bank concentration and economic growth in China. It uses panel data for 31 provinces and 8 different sectors over the period 2001-2013. Using two-stage least squares regressions, we find that bank concentration negatively and significantly impacts sectoral growth for Chinese provinces. This finding has relevant policy implication for policy-makers and academics since it suggests that the low level of bank concentration in the Chinese financial sector promotes economic growth, a finding that this is highly relevant in this period of economic slowdown.