المستخلص: |
Many of the literature have dealt with the relationship between credit growth and the real sector. Where rapid credit growth was seen as a key indicator of potential problems in the economy. A number of studies claim that rapid credit growth hinders financial stability and increases the likelihood of a crisis, paving the way for a future recession. So, the research concentrates on case of China to know the effect of increase in domestic credit to private sector on external economic balance. The research first list theories that show relation between them, and credit channels that transmit effect of monetary policy to real sector. Then analyze development of domestic Credit to private sector and external economic balance in period from 1982 to 2017 to know the relation between them. the result of this analysis states that The correlation between the current balance and the rate of growth of domestic credit to the private sector shows that it is positive in most years of study. This may be due to most of credit directed to private investment which lead to increase in exports, the Chinese banks are allocating loans to financially sound and well-managed private companies. Additionally, Commercial provisions which are important determinants of lending decisions for manufacturing companies, large companies and companies in areas with a sophisticated banking sector. Which means the validity of the research that the expansion of credit to the private sector in China does not lead to deterioration of the current account balance of payments.
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