About this Journal Submit a Manuscript Table of Contents
Economics Research International
Volume 2011 (2011), Article ID 652983, 7 pages
http://dx.doi.org/10.1155/2011/652983
Research Article

Bank Lending, Inflation, and China's Stock Market (2004–2010)

1Robert Day School of Economics & Finance, Claremont McKenna College, 500 E. Ninth Street, Claremont, CA 91711, USA
2Economics Department, University of Wisconsin-Whitewater, WI 53190, USA

Received 22 August 2011; Accepted 31 August 2011

Academic Editor: James R. Barth

Copyright © 2011 Richard C. K. Burdekin and Ran Tao. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The 2009 surge in bank lending in China was accompanied by allegations of substantial funds being funneled into the nation's stock and property markets. This paper uses 2004–2010 People's Bank survey data to examine the possible linkages between banking activity and the stock market as well as the associated inflation risks. In general, stock market strength in China seems to be accompanied by rising inflationary concerns, increased bank lending activity, and reduced banker confidence that stable conditions will be maintained. This suggests that the Shanghai market could serve as a useful indicator variable for Chinese monetary policy.