Banking Structure And Economic Convergence

A new banking system containing more banks and levels has been founded afterthe financial reform in1994，which served China’s economic growth well. But theregional economic disparity in China widened significantly and retarded economicgrowth in recent years. More than one researches showed that structure of bankingdiffers in different provinces and financial development contributes less to economicgrowth in China. So it’s critical to make certain whether and how the structure ofbanking affects the economic convergence.This paper studies five topics as follows.1）Review the researches about thestructure of banking，the structure of banking and economic growth，economicconvergence and its influence factors.2）Measure the degree of monopoly and itsdisparity of Chinese banking.3）Analyze the characters of different banks and putforward a new theoretical analysis frame based on the theories of informationasymmetry and transaction cost.4）Make quantitative analysis model based on theeconomic data of China between1995and2007.5）Summarize the research conclusionsand provide some suggestions for the optimization of structure of banking in China.The result of our research shows that there exist great disparities in the structure ofbanking in different provinces in China, the disparities first narrowed and then widened.The high concentration in banking the economic growth, and in west and middleregions it becomes more significant then that in east region. Further more, disparities indifferent provinces accounts for the economic disparities and the compatibility ofeconomic structure and the structure of banking is the main way that the structure ofbanking affects economic convergence. The conclusions of this paper means that a newbanking system，which contains more Medium and small banks，is needed to supporteconomic growth in China, and is more urgently needed in west and middle regions.Finally, lowering the entry barriers of banking is the way out.