An Empirical Research On The Relationship Between The Market Structure Of Chinese Banking Industry And Economic Growth

With the transition from planned economy to market economy, the market structure of Chinese banking industry has kept evolving, but highly monopolized market structure has been coexisting with the poor performance for a long time. After entering into WTO, Chinese financial market will be more opened and the banking industry will be faced more drastic competition. Studying relationship between the market structure of Chinese banking industry and the economic growth can't only offer experience evidences for a further reform of the banking management's system, but also has practical significance in the establishment and implement of the banking industry policy.Analyzing the market structure of Chinese banking industry by market share, centralization ratio, and HHI index, the result shows that although there is a trend that the market structure of Chinese banking industry is changing to monopoly competition, but the oligarchic monopoly market structure of the banking industry won't be changed in a short-term owning to the limit of the scale, strength and country policy. The mechanism analysis that how the market structure of Chinese banking industry effect the economic growth shows that the market structure of banking industry have a major impact on the economy by influencing the scope of credit rationing, screening borrowers, capital accumulation and bank solvency. However, the merits and the efficiency of the financial system is relative to the level of the real economy that it serves. Therefore, from the advantages and disadvantages of the unilateral financial system are unable to arrive at the conclusion of certainty, we must simultaneously examine the characteristics both the financial system and real economy, establish a unified analytical framework, we can get a clear explanation for the relationship between the market structure of banking industry of the financial system and economic development.Based on the existed empirical research frame, this thesis analyzes the inner link between the market structure of Chinese banking industry and economic growth by using a panel data model which is taken the index of the banking industry structure, economic structure, as well as other economic development in 28 Chinese provinces and autonomous regions in the period 1996-2007 as samples; banks deposit concentration ratio (CR4_deposit), loan concentration ratio (CR4_loan), the proportion of large-scale enterprises (big) and the proportion of non-state-owned economy (nsoe) as indexes for measuring the market structure of banking industry and economic structure respectively; the cross-term (big_ CR4_deposit or nsoe_ CR4_loan) between the economic structure and the market structure of banking industry as indexes for measuring the matching degree between them. Further more, investment rate (investment), the level of financial development (pcp) are introduced into the model as control variables. The results show that, firstly, the market structure of banking industry is significantly negatively correlated with economic structure, so the improvement of the bank centralization ratio have a significant negative impact to economic growth. Secondly, the symbols of the coefficients of the cross-term between the economic structure and the market structure of banking industry are in line with expected results, so in the provinces of large enterprises of high proportion, the improvement of the bank centralization ratio can promote economic growth; in the region of non-state-owned economy of high proportion, lower of the bank centralization ratio will promote economic growth.According to those results mentioned above, some policy suggestions are put forward as below: the areas of the scattered banking with high levels of economic growth shows that we should continue to relax the access restrictions on banks, encourage the establishment and the development of the private banks and foreign banks, improve the openness, promote the market competition, will be gradually adjust the financial system dominated by large state-owned bank to financial system dominated by indirect financing of small and medium-sized banks as major in order to servers the small and medium-sized company.