| This paper studies the influence of bank structure on regional economic growth in China. Bank structure in this paper means bank market structure, which is generally measured by market concentration. Because of asymmetric information, transaction costs and optimal credit decision making, there is a division of different bank structure for different sector of economy. Big banks focus on providing financing services for big enterprises, while small and medium-sized banks have comparative advantages in providing financing services for small and medium sized enterprises. In order to promote regional economic growth effectively, bank structure needs to match regional economic structure. In large-enterprise-dominated areas, a more concentrated bank structure is conducive to economic growth, while in SME-dominated areas, a more dispersed bank structure is more effective to promote economic growth. As China’s economic growth is mainly driven by labor-intensive SMEs and non-state-owned enterprises, reduced bank concentration will provide more effective services for SMEs and non-state-owned enterprises, thus contributing to regional economic growth.Based on China’s province level panel data from1985to2008, this paper conducts empirical analysis to verify above theoretical hypotheses. To further investigate the differences of China’s eastern, central and western regions, the total sample is divided into three sub-samples. The results of empirical tests support the conclusion of theoretical analysis, that is, bank concentration is negatively related to regional economic growth, a more decentralized bank structure is conducive to China’s regional economic growth, and well matched bank structure and economic structure will promote economic growth.Based on the conclusions, this paper suggests promoting the reform of bank structure in China, reducing the monopoly of the big four state-owned banks, and encouraging the development of small and medium-sized banks. |
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