Financial liberalization and economic growth: A theoretical analysis of the transforming Chinese economy

We conduct a theoretical investigation into how financial reforms are affecting the long-run economic performance of the partially reformed Chinese economy In a model with a dual structure in commodity production and financial repression, allowing the co-existence of a state banking system and an informal credit market and introducing heterogeneity in the transaction technologies of individuals, we examine the interactions between the state banking system and the informal credit market, and the effects of various measures of financial liberalization on individuals' optimal portfolio choices and the macroeconomic aggregates