China's County Finance Efficiency Research

Coordinating development of the urban and rural region is the strategic requirement for building a well-off society. So it is an urgent need to improve economy of county which is the link of city and village. And as to the county’s development, including agriculture industrialization, industrialization and urbanization, it all needs effective financial credit to support. In recent years, however, the scale of financial institutions and the funding to county become shrinking gradually, leading to ineffective improvement of economy. Therefore, it is necessary to do research of the efficiency of financial industry promoting economic development in county.In this paper, I analyze a total of30counties in the east, middle, west and northeast China during2001to2010to evaluate their financial efficiency. In this process, I select some indicators including financial assets, financial value added, and number of financial employees to calculate and use the dynamic stochastic frontier analysis to measure the efficiency.After the empirical analysis of county financial efficiency through dynamic stochastic frontier model, we can conclude that:1.From the whole view of China, the county financial efficiency is increasing year by year.2. Finance efficiency of the regions in the east and northeast of the county is the highest, and there is small gap in the region. While the financial efficiency of the central and western China is lowest with large gap within the region. But in recent years, financial efficiency improves gradually, which narrows the gap with other regions.3. Compared to financial assets, financial professional labor inputs contribute more to financial value-added, reflecting the low allocation efficiency of the county financial assets.4. In the growth of total factor productivity, technical efficiency improvement make greatest contribution. Then I analyze some important financial indicators to reveal the county financial situations clearly. Through selecting the indicators of financial institutions scale, financial ratios etc., we can find that the growth rate of the loan to county is reducing. Eastern part of China has most financial support for economic development, which means that credit investments promote local economic growth well. While in the middle and west of China, low loans invested in the county limit the local economic growth.So it can be seen that the more developed areas have high financial efficiency. While in underdeveloped areas, the financial efficiency is relatively low. Therefore, the development of county economy is a fundamental measure to improve the county finance efficiency.