Business Case Studies & Business Publications

China’s Liquidity Rules: Curbing Credit ...

Hachem, Kinda

Case

China’s Liquidity Rules: Curbing Credit Growth or Fueling the Boom?

Hachem, Kinda

GEM-0264 | Published June 10, 2026 | 10 Pages Case

Collection: Darden School of Business

Product Details

Jay Lin, a property developer operating in China in early 2015, must understand the rapid growth of credit despite regulations to the contrary before he proceeds with a construction project that will require continued access to bank financing. The case describes the regulatory landscape in China along with the evolution of the country’s banking sector from 2007 to 2014. Determining whether China’s credit boom is on the verge of being corralled by tighter regulation or was paradoxically caused by it will help Lin forecast the ease with which his construction loan can be rolled over should he undertake the project. At the University of Virginia Darden School of Business, this public-sourced case is used in an MBA elective on money and banking to explore the general equilibrium effects of regulatory changes, discuss market power and competition, identify shadow banking activities, and introduce students to China’s financial system.

The case serves the following teaching objectives: (1) Explore the general equilibrium effects of regulatory changes. (2) Disaggregate the banking sector to discuss market power and competition. (3) Define and identify shadow banking activities. (4) Introduce students to China’s financial system.