Period Of Economic Restructuring Credit Rationing Study

Since the end of 1970's, the extent to which the credit market runs according to market rules has been improving, but the special characters of China's credit market in the transformation process of economic regime also exist. From 1998 to 2002, the credit-rationing phenomenon has been found in China. On one hand, many people and enterprises in rural area and middle-western area have been complaining that it is difficult for them to get credit from banks; on the other hand, a lot of money stagnates in banking system. From the Availability Doctrine in 1950's to the asymmetric information of credit market after the middle of 1970's, the credit rationing theory that provides the micro-basis of credit rationing has been lasting for more than half of a century. The application process of economics development in credit market constitutes the outline of the credit rationing theory. To some extent the credit rationing theory, which grew under the background of modern market economy, works in China, but the credit-rationing phenomenon in China has to be explained by other special factors relating to the transformation process of China's economic regime.The model of this paper explores the links between the following factors and the credit rationing in China. The change of banks' attitude to credit risk may lead to credit rationing; Banks give much more emphasis on the trade cost and the payable value of collateral, which may give rise to credit rationing; The decreasing of asset price during economic stagnation produces credit rationing; The bias of banks' objective function from the maximization of profit and the transformation of the function relating to the reform of the financial system cause credit rationing; If different parts of the whole markets are not integrated, the credit in the part with low capital return ratio will be rationed. During economic recession, banks tend to ration the credit in the high-risk market; the removing of interest ceiling will narrow down the interest spread of deposit and credit at least during a period, which may strengthen credit rationing; meanwhile, the vulnerable borrowers, including small and middle-sized enterprises, will get more credit from banks even though they have to pay a higher interest rate.This paper also discusses the links between the relationship between banks and enterprises, collateral and credit rationing. China's banking industry is transforming from relationship banking to price banking, which will lead banks to give more credit to the borrowers and projects with low risk and high return. As s result, the credit of vulnerable borrowers will be much more rationed. The relationship between banks and customers will be substituted with contract interests, and removing the interest cap can drive banks to compensate risk with higher interest only if the corporate governance of both banks and enterprises stays in a state of scientific check and balance. Besides, improving the social environment of honesty and trust, clearing the property rights will help reduce credit rationing.On the macro-level, the following conclusions are drawn. The speed of economic growth will slow down owing to credit rationing; over-borrowing, which is the other side of the coin, will bring a lot of negative effects to enterprises; the flowing of credit capital from vulnerable market to advantageous market will reduce the welfare of the whole society, and enlarge the gap between these two kinds of markets, which will make the financial system much more fragile.This paper also shed some light on the transmission of monetary polices. Credit channel is the main conduit through which China's monetary policies affect real economy. In recent years, the transmission of China's monetary policies was "blocked up", meanwhile, "ease money " and "tight credit", which seem conflict with each other, exist together because the China's banks ration credit with a little influences of monetary polices owing to institutional disadvantages. If the corporate governance of banks and the regime for the coun...