China's State-Owned Banks' Lending Practices, 1994-2005: Empirical Tests and Policy Implications

More than half of the assets in China's banking system are accounted for by four huge state-owned commercial banks. This paper examines the changing factors influencing these banks' lending behavior over the post-1994 period on a province-by-province basis. Determinants include the concentration of state-owned enterprises, the level of provincial prosperity, deposit levels, and macroeconomic control variables. We confirm a downward trend in the banks' loan-to- deposit ratio combined with some (mixed) evidence of more lending to richer provinces over time. SOE lending remained important for at least one of the four banks.