An Information Economic Analysis On The Fragility Of China's Banking System

Bank is the core of China's financial industrial organization. The fragility of the banking system is not only a threat to their survival, but also related to China's financial development and security. A study on the causes of the fragility of banking system is of important practical significance to the promotion of China's economic and financial reforms, stability, security and sustainable development.This paper attempts to explore the fragility of China's banking system in the view of information economics, and argues that it is the asymmetry of information that leads to the fragility of China's banking system, which is manifested concretely in two aspects, that is, the credit markets and the economic system. Chapter 1 is an introduction. Chapter 2 is a brief overview of the theory of banking system's fragility and information economics. Chapter 3 measures the fragility of China's banking system. Chapter 4 analyses the market reason through the adverse selection and the moral hazard effect on the credit markets. Chapter 5 analyses the system reason through the principal-agent relationship as well as China's current banking and economic system. Chapter 6 makes specific policy recommendations. Chapter 7 gives the conclusion of the article.