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The Disaggregation of Credit and the Components of China’s Growth Model: An Empirical Analysis of How Bank Credit Affects Investment, Consumption and Growth in China

Eken, Joris Adrianus LU (2026) EKHS22 20261
Department of Economic History
Abstract (Swedish)
This thesis examines the role of credit allocation in China’s growth model. Based on the ‘Quantity Theory of Disaggregated Credit’, it focuses on how the growth in different types of bank credit is associated with GDP growth and its components. By making use of a disaggregated credit dataset from 2008 up to 2025, this thesis finds that both household and enterprise credit have a positive relationship with China’s GDP growth. The direction of Granger-causality is found to be unidirectional between the percentage change in household and enterprise loans and real GDP growth. It also found a positive relationship between bank loans to non-financial corporations and gross fixed capital formation. Unexpectedly, no positive or significant effect... (More)
This thesis examines the role of credit allocation in China’s growth model. Based on the ‘Quantity Theory of Disaggregated Credit’, it focuses on how the growth in different types of bank credit is associated with GDP growth and its components. By making use of a disaggregated credit dataset from 2008 up to 2025, this thesis finds that both household and enterprise credit have a positive relationship with China’s GDP growth. The direction of Granger-causality is found to be unidirectional between the percentage change in household and enterprise loans and real GDP growth. It also found a positive relationship between bank loans to non-financial corporations and gross fixed capital formation. Unexpectedly, no positive or significant effect of the ‘Made in China 2025’ industrial policy on the relationship between bank loans and fixed-asset investment in the manufacturing industry could be observed. Finally, the results showed a positive association between bank lending to households and household consumption growth. In particular, the growth in short-term consumption loans was positively associated with the growth in consumption, while the proxy for mortgage loans did not have a positive relationship with consumption. These findings suggest that the rising share of enterprise loans in total new bank loans may contribute to the investment-bias in China’s growth model, while the declining share of household loans may make it more difficult for China to ‘rebalance’ the sources of growth from investments and exports toward domestic consumption. (Less)
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author
Eken, Joris Adrianus LU
supervisor
organization
course
EKHS22 20261
year
type
H2 - Master's Degree (Two Years)
subject
keywords
bank credit, investment, consumption, GDP growth, industrial policy
language
English
id
9239756
date added to LUP
2026-09-07 13:53:53
date last changed
2026-09-07 13:53:53
@misc{9239756,
  abstract     = {{This thesis examines the role of credit allocation in China’s growth model. Based on the ‘Quantity Theory of Disaggregated Credit’, it focuses on how the growth in different types of bank credit is associated with GDP growth and its components. By making use of a disaggregated credit dataset from 2008 up to 2025, this thesis finds that both household and enterprise credit have a positive relationship with China’s GDP growth. The direction of Granger-causality is found to be unidirectional between the percentage change in household and enterprise loans and real GDP growth. It also found a positive relationship between bank loans to non-financial corporations and gross fixed capital formation. Unexpectedly, no positive or significant effect of the ‘Made in China 2025’ industrial policy on the relationship between bank loans and fixed-asset investment in the manufacturing industry could be observed. Finally, the results showed a positive association between bank lending to households and household consumption growth. In particular, the growth in short-term consumption loans was positively associated with the growth in consumption, while the proxy for mortgage loans did not have a positive relationship with consumption. These findings suggest that the rising share of enterprise loans in total new bank loans may contribute to the investment-bias in China’s growth model, while the declining share of household loans may make it more difficult for China to ‘rebalance’ the sources of growth from investments and exports toward domestic consumption.}},
  author       = {{Eken, Joris Adrianus}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Disaggregation of Credit and the Components of China’s Growth Model: An Empirical Analysis of How Bank Credit Affects Investment, Consumption and Growth in China}},
  year         = {{2026}},
}