Impact of Liberalization of Financial Resources in China's Economic Growth : Evidence from Provinces

By using the sources of investment and based on provincial data, this paper examines the efficiency performance of the four sources of total investment in fixed assets in China for the period 1985-1998: state budget appropriation, national bank loans, self-raised funds, and foreign investment. The result of the panel data study shows that the growth of provincial output is positively related to the growth of national bank loans and self-raised funds. State appropriation is still a significant source of investment in the interior provinces, though this suggests a lack of alternative of nonstate sources. The paper concludes that nonstate sources of funding are generally more efficient in promoting output growth