Analysis On Relationship Between Bank Loans And Economic Growth

Our country is at the key point of economic transformation nowadays. Credit supply has an extremely important impact for sustainable economic development.Anhui province in central of China, belong to underdeveloped areas, the development of the task is heavier, the demand for credit funds is much greater. In recent years, the Anhui province have been increasing the credit supply and provides more and more support to the sustained and rapid development of economic society. But overall, there exist various kinds of problems in credit market in Anhui Province. The fund use efficiency also needs to be further promoted. Right now, the credit supply still cannot satisfy the credit demand of economic development in an all-round way.This paper is a comprehensive study about the problems existing in credit market of Anhui Province, as well as the compatibility of credit supply with regional economic development. These topics will be discussed from theoretical perspective and from empirical perspective, qualitatively and quantitatively.First of all, this paper analyzes the amount and structure of credit supply of Anhui Province during recent years, utilizing methods of statistical description, chart analysis and comparative research. Our results indicate that the correlation between credit supply and GDP growth increases significantly, and that the contribution of credit supply to economic growth is improving gradually. Our paper points out that, comparing with other provinces, as the implementation of a serious of regional development strategies, the upside potential of credit supply and economic improvement in Anhui Province is being uncovered step by step. But we also figure out some problems with respect to the structure of credit supply and the efficiency of capital allocation.Next, this paper empirically studies the quantitative relationship between credit supply and economic development of Anhui Province. Via econometricaJ method and EVIEWS, we take Granger Test of total supply of credit and economic development. Results indicate that some relationship does exist between credit supply and economic development. On one side, there is significant impact of economic development on credit supply, both in short-term and in long-term. On the other side, credit supply has positive impact on economic development, and this effect is more obvious to industrial added value than to the aggregated GDP. Other conclusions include:in the long-term, savings is exogenous, and the level of credit supply is determined by the country-level economic development and social improvement; but in the short-term, savings, especially the amount of residential savings, constrains credit supply to some extent.Furthermore, this paper studies the qualitative relationship between aggregated credit supply and economic development of Anhui Province. Utilizing statistical method and SPSS, we process principal component analysis with respect to comprehensive valuation of credit supply of Anhui Province.Combining the empirical results with actual situation, this paper points out some problems about credit supply in Anhui Province, such as unbalance of industrial structure, excessive discrepancy between savings and lending, price discrimination in credit market for mid and small companies, under-development of the whole financial market, etc. This paper also provides several regulatory suggestions with respect to expanding credit supply, optimizing credit structure, encouraging financial innovation, and fortifying the construction of financial environment. By implementing these suggestions, we wish we could achieve sustainable increasing of credit supply and efficient economic development.