Summary of  the General Discussion on “Interest Liberalization and the Estimation of  Implicit Interest Rates in China's Banking Sector”

Wing Thye Woo led the discussion with a number of comments on Shen's representation of China's banking sector. First, in describing the activities of China's banking sector, Woo advised the authors to consider using the term implicit deposit rate premium rather than implicit interest, because this change in terminology more directly conveys the measurement of payment above and beyond the explicit interest rate. Next, Woo cautioned that the bank maximization problem is more complex than it is in the paper. In particular, the model treats the revenue per loan, r_a, as exogenous. Although the exogeneity assumption may be an accurate representation of China's banking sector in 2005, however, Woo argued that assumption of exogeneity was no longer appropriate by 2013. Instead, Woo suggested that the modeling of bank decisions in 2013 should allow for the endogenous selection of both r_a and the implicit interest rate, i_m...