Research On Financial Disintermediation In China

Disintermediation is an inevitable phenomenon when financial system develops to acertain stage, before the80’s of the twentieth Century, Chinese financing way is verysimple, because the enterprise endogenous financing ability is poor, coupled with thelimited financing channels, which is mainly dependent on bank credit. Since thereform and opening up, especially since1994′the reform of the financial system,Chinese financial structure has changed from single to diversifity.Financial instrumentshave gradually diversified, with expansion of financial services and service areas.From the present situation of China’s financial market, the degree of financialdisintermediation further enhances, and business entity further depends less on thebanks,direct financing,particularly bond financing being one of the basic forms ofenterprise financing. The current environment is more superior, system of rules moreperfect, therefore, China will gradually enter the process of being the maincharacteristics of deepening with financial disintermediation and interest ratemarketization. Financial disintermediation is as a result of the interest game actuallybetween the banking and corporate entities. Financial disintermediation has effect onmacroscopic, microscopic through its direct effect and indirect effect on the economy.Purpose of the most fundamental Research on financial disintermediation is to improvefinancial structure, raise the efficiency of capital allocation and maximize thepromotion of economic growth.Financial disintermediation is of great necessity and feasibility. Because ourfinancial market is a little far from fully market-oriented,and there are some distortionsin financial system.In this case, the allocation of funds has a very large promotionspace, so the financial disintermediation is a breakthrough of the reality of the plight.Direct financing can overcome the disadvantages of bank credit, maximize thecompany’s financing capacity, actively promote the transformation from savings toinvestment, and reduce the risk of the entire financial system. At the same time, thedirect financing market is an important foundation of modern financial innovation,both innovative financial products and financial system are highly dependent on thedirect financing market.Influence factors of financial disintermediation is mainly caused by the financialsystem, financial innovation, negative real interest rates, the enterprisedifficultfinancing position and so on. In the role of these factors financial disintermediation inChina in recent years has the trend to accelerat clearly. Analysis of financialdisintermediation should befirst analysis of the social financing scale, because it notonly can better reflect the supply and demand of funds to support the real economydevelopment, but also has a close relationship with CPI, PMI and other indicators,even to be the "beacon" effect. Firstly,From the analysis of social financing scale: with the development of capital market and the increase in the proportion of directfinancing, the ratio of bank credit to social financing scale has significantly decreased,while the indirect financing in the capital allocation function significantly enhanced.Before2005, the proportion of direct financing and indirect financing remained atmore than90%, while the2007-2009years the proportion were78.9%,83.1%and80.5%. In2011, bank loans accounted for the proportion of total financing was63%.Secondly, non-bank financial institutions begin to support the entity economy. Fromthe direct financing tools, in the recent five years, corporate bonds, short-termfinancing bonds, medium-term notes shows fast increasing trend, especially since2009,funds raised by issuing enterprise bonds have been more than that of financing bonds,the unfavorable situation of long-term development of enterprises bond lag haschanged significantly, which shows that the bond market attracts much attention, so inthe financial market status has been improved significantly. Thirdly, from the regionalperspective analysis, there is a great difference in the degree of financialdisintermediation among the provinces.In eastern region, financial disintermediationdegree is high, faster progress, and the central and western regions is relatively slower,but where there are signs of acceleration. Because the East owns developedinformation, perfect financial infrastructure, and the direct financing is of the moreobvious advantages, therefore the central and western regions creates conditions,speeding up financial transformation.We Should focus on the analysis of influence of financial disintermediation onbanking. Financial disintermediation increases pressure of funding on banks, assetsbusiness and liabilities business is likely to be squeezed, living space being narrowedin a certain range,but which also helps to accelerate financial innovation, forcingcommercial banks to change the way of management, reduce the financial monopoly,an opportunityfor fair competition of financial market, and is conducive to theallocation allocation efficiency. In a word, the development model of commercial bankin the future should timely adjust, by improving the sources of funding channels andraising the utility efficiency of capital and speeding up the development of OBSA, andmaking up the shortage of traditional business.Commercial banks should pay attention to liquidity and credit risk, such as the realestate credit risk, the local government platform risk, industry risk of overcapacity,especially pay attention to the”short money”.Mixed operation is the futuredevelopment trend of commercial banks, but different from the past simple operationmode, the establishment and improvement of deposit insurance system is made to formfinancial safety net. Influence of financial disintermediation on business is extensiveand profound.From the overall look,which is conducive to capital allocation efficiencyof enterprises and helps to alleviate financing "bottleneck". Direct financing channelssignificantly reduces the cost of financing, expands the sources of funds, also have adirect impact on the optimization of enterprise financial leverage. Because it help to improve business funding sources the vitality of enterprises enhance.With the decreaseof the development of capital market and financing threshold, the development ofdirect financing tools will have a more active role in expanding the sources of fundsfor small and medium enterprises. In addition, enterprises should improve the creditsystem, perfect management mechanism to accelerate.Financial disintermediation is considered one of the important items in the monetarypolicy. With the increase in the proportion of direct financing, alternative tools of thetraditional deposit and loan emerge in an endless stream. At the same time, financialinnovation has made the division of each currency levels blurred, the relativerelationship between money supply and the ultimate goal of monetary policyintermediate target destroyed, many countries begin to transit to the interest rate index.Financial "disintermediation"effect is more and more obvious.financialdisintermediation makes transmission channels of monetary policy complex so toaffect the efficiency of central bank regulation of final in size,and direction, withgreater uncertainty. Part of the role of monetary policy instruments reduces, whichincreases the difficulty of monetary policy control. Importance is in accuratelyanalylzing tools of monetary policy effect on the allocation of capital and liquiditymanagement. Embodied in the following points: first, financial disintermediationreduces the effect of statutory deposit reserve to a certain extent, and expands thedegree of marketization of open market operations and indirect regulation hascontinued to improve. secondly, the interest rate regulation is in the increasinglyprominent role. Foreign experience shows that, the higher proportion of directfinancing, the more sensitive the entity economy to interest rate. For example,American the rate of direct financing and indirect financing is approximately75:25(atthe end of2009, the European60:40(data) at the end of2009, and China data) to25:75(the end of2010data), American and European financing body′s reaction to theinterest rate is more sensitive to the Chinese. In practice, as the marketization ofChina’s interest rates increase, financial disintermediation will gradually raise theoperation efficiency of interest rates.Thirdly, The utility of financial disintermediationdrop down the price level, or that is conducive to the suppression of prices rising.Financial disintermediation has no money creation mechanism, so that the impact onthe price level is small, sometimes even inhibitory.Because, financial and non-financialenterprises financing activities are distinguished, the commercial bank loans directlyinto the real economy has the effect of monetary multiplier, direct financing ofnon-financial enterprises has no,unless the bank direct holding,In short, theoperation of monetary policy should be shifted to the number type of tools from usingthe price type tools, and pay attention to the coordination of the two complexes. Atpresent, the central bank’s using social financing scale as an intermediate target ofmonetary policy, macro-control is a useful exploration and innovation.In the financial disintermediation environment, more attention should be paid to the importance of financial risk and financial supervision. The risk of banking and capitalmarkets may have additive effects, and more transitive, even more prone to moralhazard. highlight key areas of risk prevention of financial regulation is the localgovernment financing platform loans, real estate credit loan risk and some industrieswith surplus credit risk, as well as the enterprise debt too fast. In specific business, thefinancial products business and shadow banking supervision should be strengthened.we should adhere to the dynamic nature of the financial supervision and regulation,strengthening the early warning and prevention of systemic financial risk, holding theline with no systemic, regional financial risk.To establish and perfect the system ofdeposit insurance and such like.In short, the financial disintermediation is a gradual process.judging from thecurrent trend, the trend has accelerated. Without a determined value about the degreeof financial disintermediation, no more than a range, the range should adapt economicstructure and the external environment. We Should learn from the successfulexperience of western countries in the process of financial disintermediation. On themacro level, improve the market mechanism, and actively promote the interest rate andexchange rate marketization. Financial infrastructure and legal framework needs to befurther perfected: especially the coverage and quality should be used to improve thecredit system, as well as the supervision of credit rating agencies and improving thequality rating.