The Implementation of Central Bank Policy in China
We examine the roles of commercial bank ownership and CEO faction membership in facilitating or in hindering the implementation of central bank policy in China. Both ownership and membership matter: provincial or city government-owned banks whose CEOs are members of a generalist faction within the Chinese Communist Party (CCP) respond least to People’s Bank of China (PBC) mortgage lending guidance. Bank responses have real effects on housing markets. We conclude that China’s different levels of government and the CCP’s different factions enjoy some discretion in responding to PBC guidance and exploit such (limited) discretion in line with their own interests.
Co-Author(s): Michel Habib, Yanjie Wang, Zexi Wang