China’s Banking System: The Claymation Version

In this two-minute video from the Wall Street Journal, Ken Brown explains the basic imbalances caused by Chinese insular banking system and why it generates too much infra-structure investment and favors large state-owned businesses over smaller businesses and consumption. While the discussion and animation is engaging, it does not really bring us closer to a solution, other than the neo-liberal mantra of greater deregulation.

That message may have been more compelling before the recent financial crisis. Of course, we are sensitive to the distortions caused by state-owned banks lending to state-owned businesses and still mostly state-set interest rates. Yet, the call for liberalization seems overly simple. Did not the US and Europe err in precisely that direction ? Did not the US and Europe enjoy rapid industrialization and growth during periods when interest rates and banking activity were closely regulated?

This piece is cross-posted from Marc to Market with permission.

One Response to "China’s Banking System: The Claymation Version"

  1. gaingane   December 31, 2013 at 1:28 pm

    In banking methods as in governing methods, if people do not know what an ever changing and accommodating banking / governing methods could be , then we are excused by ignorance. If we do know and refuse to adopt timely accommodating methods, shame on us.
    Before 1913 Canada and other like nations created the sovereign money. Now Canada, the nation and other like nations could be creating at least some of the sovereign money instead of issuing bonds to create money. There is no need for Canad to have a national debt unless national debt can be proved to be a greater good.
    See banking articles at mcgillisintellect.typepad.com