#08-18
Law, Institutions and Finance in China and India
Franklin Allen, Rajesh Chakrabarti, Sankar De, Jun "QJ" Qian and Meijun Qian
Abstract:In this paper we examine and compare the legal and institutional set-ups in China and India.
China differs from most of the countries studied in the law, institutions, finance, and growth
literature: Its legal and financial systems as well as institutions are all underdeveloped, but its
economy has been growing at a very fast rate. Despite its English common-law origin and British-style
judicial system and democratic government, there is enough documented evidence to suggest that the
effective level of investor protection and the quality of legal institutions in India are quite weak as well.
However, this has evidently not prohibited growth in either country. Small and high growth firms in both
countries make extensive use of informal and relationship-based arrangements to finance growth.
Keywords: India, law and finance, institutions, growth, banks, markets, SME sector.
JEL classifications: O5; K0; G0.
