A Study On The Resources Allocation Effect Of Financial Intermediary In China

Promotion of resources allocation efficiency is not only one of the important issues ofeconomics research but also the important one tried to resolve by economics practice.Since reform and opening, China’s economy has experienced an unprecedented rapiddevelopment although never getting rid of structural imbalance problems. Misallocation ofresources is undoubtedly the most important one among types of factors leading tostructural imbalance in China. In response to the2008global financial crisis, the Chinesecentral government again proposed the measure of structural adjustment. The so-called"structural adjustment" is carrying on the re-allocation of resources to change theexisting imbalanced and distorted economic structure, and finally achieve economicstability and healthy development.From a narrow understanding, allocation of resources refers to the configuration ofcapital, labor and land elements. However the efficiency of capital allocation has adecisive and oriented impact on the efficiency of the land and labor allocation. Efficiencyof capital allocation depends on whether the financial system and financial market isdeveloped and perfect or not to great extent, especially the perfection of credit market andthe use of financial instruments or means in credit market.This thesis from the angle of bank financial intermediaries and the perspective of therelationship between Chinese economic structural imbalances and resource allocation,research the capital allocation effect of credit market which is mainly the state-ownedcommercial banks and takes commercial banks and corporation as the supply and demandsides, focusing on that of interest rate-the price signals and adjusting means of creditmarket.The paper starts with a general analysis of capital allocation mechanism and path ofbank financial intermediation and, especially that of the capital allocation function ofinterest rate as a tool from its level and structure and concludes that bank financialintermediaries or credit markets and regulation and structure change of interest rates havea major impact on the efficiency of capital allocation. Then, it from the perspective of theelements’ configuration analyzes the configuration effect of Chinese bank financial intermediaries on capital, labor and land elements, and points out that the bank financialintermediaries or credit markets and interest rate adjustment will directly determine thecapital allocation efficiency, and through the guide role of capital allocation, further affectlabor and land allocation efficiency.Finally, it estimates Chinese capital and labor allocation efficiency from1990to2007with the use of OLS, finds during two decades, resource allocation efficiency showsfluctuations to up or down and even decline slightly, and empirically research resourceallocation effects of Chinese banking reform for nearly two decades, consequently findsthat the gradual relaxation of control over interest rate or forward marketization of interestrate and encouraging the development of small and medium sized banks to provide creditto SMEs will benefit enhancing efficiency of resource allocation. Meanwhile, the centralbank according to the economic development situation regulates the credit marketappropriately to achieve the rational allocation of credit funds by industry, increase creditsupport to agriculture and SMEs, compress credit scale of overcapacity industry, drive therational flow and configuration of labor and land elements by the flow of credit funds,thus contribute to the improvement and upgrading of industrial structure and the economyhealthy and stable development.