China’s financial system has been integral to its spectacular economic growth over the past 40 years. By accounting for unique features of China’s financial system, Aggregate Financing to the Real Economy (AFRE) is a broad measure of the nation’s yearly flow of liquidity, introduced by the People’s Bank of China (PBC, China’s central bank) in 2011 and described by officials as “indicating total funds the real economy obtained from the financial system over a certain period of time.” In this lecture, Zhiguo He presents a detailed explanation of AFRE’s composition, highlighting the motivation behind the PBC’s move to introduce AFRE: Given rapid developments in China’s financial system over the past two decades, especially since the 2009 four-trillion stimulus program, traditional credit measures like bank loans increasingly do not reflect the extent of financing to the real economy. Around the concept of AFRE, Zhiguo He revisits the recent development of China’s financial system, including shadow banking, municipal bonds, and the real role of China’s stock market.
This lecture features Zhiguo He, Fuji Bank and Heller Professor of Finance at the University of Chicago, Booth School of Business. His recent work, China’s Financial System and Economy: A Review, reviews the literature on China’s financial system and its connections to the Chinese economy based on the categories of AFRE.
Speaker: Zhiguo He, Fuji Bank and Heller Professor of Finance, University of Chicago, Booth School of Business; Director of Becker Friedman Institute for Economics in China, University of Chicago
Moderator: Zening Ge, Executive Director, The University of Chicago Center in Beijing