The Empirical Research Of The Relationship Between China’s Banking Market Structure And Economic Growth

Great changes have taken place in the banking industry in China since the reform and opening up. Banking market structure has been further rationalized, which has changed from complete monopoly into oligopoly, and then become monopolistic competition gradually. At the same time, we have also made remarkable achievements in economy and the economic growth is at a higher level. 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.This paper which is based on economic growth, industrial organization theory another related studies use a combination of theoretical analysis and empirical analysis to study the relationship between China’s banking market structure and economic growth. We use market concentration index and GDP rate of change to reflect the market structure of banking and economic growth, and use21years of data from1989to2009. The empirical study illustrates that there is low negative correlation between banking market concentration and economic growth.This shows that Concentration of China’s banking sector is negatively correlated with economic growth, and the reasons the leading position of four major state-owned commercial banks and the deviation of the Ownership of state-owned commercial banks. At last, we give some policy such as establishing of banking market structure compatible with economic structures, encouraging the development of small and medium-sized banks, strengthening government controls on the banking sector.