Study Of The Interrelationships Between The Concentration Ratio Of The Banking System And Economic Growth

Recent empirical work in the field of financial intermediation and economic growth has established a strong, positive association between the development of an economy's formal financial sector and its level (or rate of growth) of real activity. There is also a well developed theoretical literature exploring the nature of this correlation. However, most of the literature on the interrelationships between intermediation and growth considers an economy possessing a competitive banking system. As a matter of fact though, different economies display variation in the industrial structure of their banking systems. Consequently, more recent theoretical works have begun to examine and compare the macroeconomic differences between economies with competitive banking systems and those with monopolistic banking systems.The purpose of this paper is to further extend this literature by examining how the market structure of the banking system impacts the economic growth.This article is going to examine and compare the interrelationships of concentration ratio of bank system and economic growth of Shandong and Zhejiang provinces, then put forwords my suggestions for the development of the two Provinces.The result shows that there is negative correlations between the concentration ratio of banking systems and economic growth in Shandong and Zhejiang. The economy grows with the drop of banking centralization in this two provinces. The difference is Shandong's economic growth result in the drop of centralization of it's banking system, turnover incorrect then. In Zhejiang it is a two-way causality between concentration ratio of banking system and economic growth.At last, this paper puts forward some suggestions: improving the quality of financial assets, adjusting and optimizing the banking structure, making great efforts to develop the non-state owned economy and small and medium sized financial intermediaries.