Disguised Corruption: Evidence from Consumer Credit in China

Disguised Corruption: Evidence from Consumer Credit in China

By
Sumit Agarwal, Wenlan Qian, Amit Seru, Jian Zhang
Journal of Financial Economics. August
2020, Vol. 137, Issue 2, Pages 430–450

Using a comprehensive sample of credit card data from a leading Chinese bank, we show that government bureaucrats receive 16% higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher likelihood of delinquency and debt forgiveness. Regions associated with greater credit provision to bureaucrats open more branches and receive more deposits from the local government. After staggered corruption crackdowns of provincial-level political officials, the new credit cards originated to bureaucrats in exposed regions do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are similar to those of non-bureaucrats.