The Henan bank protest, the Evergrande crisis, and the perennial local government debt issue in China all point to one thing: there’s something wrong with the country’s banking system and Beijing needs to fix it. In particular, it needs to better regulate the numerous small banks that are now so intimately intertwined with much of China’s economic challenges. Beijing is working on it but it’s hard to do. This talk explains why. First, the exponential proliferation of small banks in the past three decades is hardly a natural phenomenon of economic development; it is the outcome of a grand historical central-local bargain that's difficult for current leaders to upend. Second, and relatedly, many small banks have become crucial pillars of local economic development. Tight regulation and excessive punishment will therefore hurt local growth further in this difficult time. Beijing will have to juggle.
 

Speaker 
Prof. LIU, Yao Adam
Prof. LIU is a political scientist trained at Stanford University, though he doesn't believe in disciplinary and methodological boundaries. He studies Chinese politics and political economy. His dissertation, "Building Markets within Authoritarian Institutions: The Political Economy of Banking Development in China," won the 2020 BRICS Economic Research Award.