Study On The Relation Of Credit Rationing And Regional Economic Development

Over 30 years since the reform and opening up to the world, the Chinese Banking industry credit gross and the economic output GDP have increased rapidly, and the developing tendencies of them are basically in the same pace. Is there actually some kind of coincidence, or some other reasons in addition? If there is certain causal relation between them, then, which is the causation, and which is the result? A further research is required to be made out. The understandings of the relationship between the credit rationing with various regional economies development will have great effects on the establishment and the execution of the state finance policies,monetary policies and credit policies.At the same time,it will affect the implement of the financial policies,monetary policies and credit policies, the development of Chinese regional economy and the entity economy, even the realization of the Chinese macro economic development goals. Therefore, a research on this topic in such a background, undoubtedly has great practical significance on coordinating to the non-balanced development of the four wide regional economies, the promotion of the credit rationing efficiency and a nice financial policy to narrow the gap in regional economic development. We dare say that the research not only brings important realistic theory significance and the tremendous profound influence, but also has a highly using value and a strong policy guidance. Particularly in the macroscopic aspect, it is helpful to understand the differences of the Chinese regional economies development and the effectiveness of the establishment of monetary and credit policies about the regional differences, to promote the non-balanced coordinated development of the Chinese regional economies by making full use of the credit rationing in the present global financial crisis.There is no unified and acknowledged definition on credit rationing so far, and even no measuring indicators of credit rationing. The above-mentioned were considered to be too difficult to be included in the literatures, so they were not paid enough attention seriously. This article re-defined the definition of credit rationing and the measuring indicators of credit rationing on the basis of summarizing and absorbing on the previous studies. It is considered that credit rationing is a constraint for demand-side of credit funds and an imbalance between the supply and the demand in the credit markets. It is not only an absolute concept, is also a relative and dynamic concept. It is manifested in two situations:short supply (lack of credit) and an over-supply (excessive credit). According to a large amount of literature, the study of the relationships between credit rationing and regional economic development is scattered in the literature on the relationships between financial (intermediaries) development and economic development. Conclusions are also different because of different objectives, scopes, methods of research.. Generally speaking, there are three relationships between the credit rationing and economic development including one-way causation, two-way causation and non-causation relationship. Although a large amount of literature is involved in the researches of the topic above, there is no special and professional study in this area yet. Therefore, special studies of this topic will be a great challenge. The achievement of the researches is believed to be great valuable to other people.Since the founding of our country, China's regional economic development strategies have came through three stages:an equilibrium development non-equilibrium development and non-equilibrium and coordinated development. After reform and opening up, China's sustained rapid economic growth has been called "Chinese Puzzle", but structural breaks of four major regional economic development are hidden. China's economic growth mainly relies on the pulling of eastern region, but the Midwest and the Northeast region's economic growth has not been driven in the same proportion by rapid growth of eastern region. China's regional economic development is quite different, and indicators of differences of the regional economic development takes on different trends in forms and features of "S" type, "L" type, inverted "U" type and "W"-type. With regard to the formation of the reasons, different scholars give different answers from different angles. However, this research from the respect of the capital investment, argues that the extreme imbalances of the main four inter-regional distribution in capital investment including credit funds,foreign investment and total fixed asset investment are the main economic reasons.In the view of the evolution and institutional transition of China's Credit rationing, China's credit rationing has always been a non-equilibrium phenomenon, as a whole, it went through three stages, a complete program of credit rationing, a planning market-oriented inclinations of credit rationing and the basic market-oriented credit rationing. It is a "super credit" non-equilibrium credit market nn the first two stages.The feature of the third stage is non-equilibrium credit rationing on a "credit crunch", which is different from the feature of market in Western commercial banks. Under the influence of the four major regional economic development disparities and credit rationing system reform, China's four main regional credit rationing is actually a mechanism of "plan" and "market" of the "dual credit rationing", namely, the "government-led" credit rationing and Stiglitz and other S-W model "of market players type" credit rationing of McKinnon and Shaw-type MS model. It will further intensify the regional differences of credit rationing, which leads to credit funds fast flowing to low-risk, high-yield and developed regions, slowing down the inflow of funds into high-risk, low-yield and relatively backward regions, or funds "back" to developed regions. Also, it will lead to high disequilibrium of regional differences of credit rationing and a non-equilibrium strange phenomenon of the non-equilibrium of the "spatial distribution" where serious regional structural "excess credit" and "short credit "coexist. Therefore, A Correct Understanding of the combination of the following three aspects is a fundamental prerequisite and an important guarantee to eliminate regional differences of credit rationing and to promote regional economic coordinated development of non-equilibrium effectively. The first is the dual nature of credit rationing coming from " government leading mechanism" and "market mechanism", the second is "regional differences" of credit rationing, and the third is non-equilibrium differences of four regional economic developmentAdoption of a fixed-effect model to control the fixed effects of all of the regional existence, an empirical analysis is made, about the interaction and causation between Credit Rationing and Regional Economic Development in the provincial levels and regional levels in China's different regions from 1978 to 2007. Conclusions indicate that causal relationship exists between credit rationing and regional economic development, but regional differences are remarkable, the influence of the credit rationing on economic development has a relatively small role in promoting one-way causal relationship between the eastern and central regions; however there is a significant endogenous more two-way causality between two western regions. On the one hand, credit rationing has an effect on regional economic development, presenting a gradient-enhanced tendency from the developed areas to the backward areas. On the other hand, economic development has a great influence on regional differences of credit rationing. Regional economic development has less impact on credit rationing in the developed eastern regions and relatively developed central regions, but has more impact on the relatively backward western regions. At the same time, Credit rationing has obvious characteristics of the strength of the regional. Credit rationing is relatively weak in the developed eastern regions and the relatively well-developed central region, but strong in the backward western regions, which supports and demonstrates Patrick's "supply-leading" and " demand-following " theory on the credit rationing. In addition, also found that equity financing plays a more and more important role in regional economic development, which is a significant substitution for the bank credit.Market coordination is the foundation, and government coordination is a supplement. We will endeavor to coordinate credit rationing and regional economic development by the "invisible hand" of the "market coordination mechanisms" and the "visible hand" of the "government coordination mechanism", to compensate for the market failures by certain administrative intervention and the necessary macro-control means, to promote non-balanced and coordinated development of credit rationing and the regional economy together, to realize the goal that "four-wheel drive" of China's economies develop rapidly together.