Research On The Regional Loan Allocation Of State-owned Commercial Banks In China

In the economic transition, it is extremely important for China to establish a banking system that can allocate financial resources effectively. Economy rules show that in a free market, the regional loan allocation has the same trend with regional economic difference, which tend to be divergent in the first stage and then turn to be convergent. We use for reference the model of industrial organization economics to test the convergence degree of the regional loan allocation of China's state-owned commercial banks, and find it highly convergent. Deriving from a model of bank profit maximization, we then exploit regional financial and economic data to test the reasons for the convergence of the regional loan allocation of state-owned banks. The results show that loan decisions are still overly influenced by policy intervening, although China has enforced many financial reforms from 1990's. In the last section of this article, we discuss the main reasons for the convergence and table a proposal to improve the efficiency of the loan allocation of the state-owned banks in China.