Evan Oxhorn

Publication Date

Spring 2012

Document Type


First Page



China is rapidly becoming the world’s largest consumer market. As the number of middle-class Chinese consumers has grown, so too has the size of China’s consumer finance system. To date, there has been little scholarship on consumer finance in China. This article takes a first step at filling this gap in the literature. It argues that China’s consumer finance system is fundamentally a tool of the state, which uses “financial repression” of Chinese consumers to acquire capital through shadow taxation. This political-legal system allows reallocation of consumers’ capital for political purposes and underwrites China’s rapid growth. But cheap consumer capital has primed the Chinese economy for an economic collapse by encouraging unsustainable asset bubbles. Ironically, this very problem makes it impossible for China to liberalize its consumer finance system, lest a shortage of easy capital precipitate a collapse. China’s elite are also against financial liberalization because it is not in their personal interest. Ultimately, meaningful liberalization of China’s consumer finance system is unlikely because change would require the type of political-legal liberalization which China’s government has been unwilling to pursue

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