We have been arguing for the rising importance in China of private capital to support state activities and GDP growth in general. However, the role of the state in China’s capital flows should not be dismissed. One institution that is playing a growing role in China is the China Development Bank, an institution that has become Beijing’s “troubleshooter” for distressed firms and local governments. Its traditional position providing housing redevelopment loans (shanty towns) has helped support the local property market, and also land sale revenue that is crucial for local governments. Increasingly, the CDB is also engaging in corporate recapitalization of Chinese firms and loans to local government companies.
How significant are these functions and how important to the Chinese economy?
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