Inter-regional banking integration and economic synchronization between regions in China

XUE Chang, HE Qing, ZHANG Ce

Systems Engineering - Theory & Practice ›› 2023, Vol. 43 ›› Issue (1) : 1-19.

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Systems Engineering - Theory & Practice ›› 2023, Vol. 43 ›› Issue (1) : 1-19. DOI: 10.12011/SETP2022-0772

Inter-regional banking integration and economic synchronization between regions in China

  • XUE Chang1, HE Qing2, ZHANG Ce3
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Abstract

Based on the dataset of branches of China's banking institutions, this paper studies the impact of inter-regional banking integration on economic synchronization between regions in China. We find that the rise of inter-regional banking integration significantly narrows the gaps of economic growth between regions and promotes the economic synchronization between regions while major four state-owned commercial banks play a primary role. After addressing the endogeneity concern by using the instrumental variable based on city commercial banks' restructuring and mergers over years, the benchmark conclusion remains robust. When employing earthquakes and COVID-19 outbreak as risk shocks, this paper finds that China's banking system, especially major four state-owned commercial banks, can significantly share the negative shocks of disasters on disaster-stricken areas' economy. This paper deepens the research on the role of the banking system in China's macro-economy, and explains the influence of the banking system on economic synchronization between regions from the perspective of risk sharing. This paper provides evidence for the financial support for the real economy and regional economic synchronization in China.

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banking integration / financial system / synchronization / risk sharing

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XUE Chang , HE Qing , ZHANG Ce. Inter-regional banking integration and economic synchronization between regions in China. Systems Engineering - Theory & Practice, 2023, 43(1): 1-19 https://doi.org/10.12011/SETP2022-0772

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Funding

Major Program of National Social Science Fund of China (20ZDA053, 20&ZD105); Key Program of National Social Science Fund of China (19AJY028); Youth Program of National Natural Science Foundation of China (72101267)
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