Research On China's Banking Fragility And The Institutional Factors

Banking system is the principal part of Chinese financial system, which indicates the financial fragility mainly is banking fragility. Whether the banking system is stable or not is crucial to the development and stability of our financial system. Though there has not taken place large-scale banking crisis, Chinese banking fragility is arousing high attention. To investigate the root cause and to find solution look seems critical to Chinese banking system in the competition circumstance within WTO frame. Under this background, this dissertation takes banking fragility, the new but rigorous subject, as the research focus and tries to form a frame of definition, theory, mechanism and policy system. The purpose is to provide useful theory support and exercisable proposals.The dissertation firstly discusses the banking fragility in general. This part defines the banking fragility and analyzes it deeply. It also points out that it is a process from quantitative change to qualitative change through construing the relationship among banking risk, banking fragility and banking crisis, and emphasizes the influence of banking fragility imposing on economy from four different aspects.Then the generation mechanism of banking fragility is probed into the dissertation. This part analyzes the endogenous mechanism from the points of bank, enterprise, information economics and bank runs. Then it analyzes the exogenous mechanism from the points of financial liberalization, deposit insurance and loans competition. At last, it analyzes the dynamic evolvement mechanism from the points of financial entropy and financial institution change.The dissertation demonstrates Chinese banking fragility. This part firstly expounds the present situation of our banking fragility on the basis of capital adequacy, liquidity proportion and so on. On the basis of studying the existing literatures, this dissertation constructs a set of indices system which is composed by 3 groups including 17 variables. This part demonstrates our banking fragility using Logit model with 19-year data from 1985-2003. After analyzing the outcome of demonstration, this dissertation brings forward that our banking fragility roots in not only the common market factors, but also the peculiar institutional factors coming from the transitional economy period.On the basis of the former chapters, the institutional cause of our banking fragility is expatiated. Firstly, the dissertation analyzes the institutional causes of our banking fragility's status quo, which are focused on organization system, credit market andsupervision system. Secondly, it emphasizes the institutional causes of Chinese banking fragility such as the disfigurement of property right, the incomplete of supervision system, the trap of informal finance, etc. then, some prevention countermeasures and policy proposals like reforming existing property right, strengthening supervision system, consummating financial system, constructing limit Banking Safety Net, and so on, are submitted accordingly. Lastly, this dissertation points out that the urgent affairs of our banking is to eliminate enormous non-performing loans, and suggests that China should privatize Assets Management Corporations for maintaining Chinese banking's perennial stabilization.