Analysis On Effect Of Bank Market Structure And Financial Stability Of China

As the core of the modern economy, finance plays an important role in the whole national economy. With the continuous evolution of economics globalization and financial integration, a good financial system is an important prerequisite for maintaining the stability of financial market and economy growth. Banking as the core of finance system is not only a crucial part of modern finance, but also a vital intermediary of state macro-control. The stability of banking industry is closely related to the sustainability and health development of the economy. In recent years, as the increase of financial competition and deregulation of banks, the operation risk of banks is increasing, and the frequency and range of the crisis in various countries and regions also presenting a rising trend. China has banking oriented system and dominates indirect financing. With the continuous improvement of the opening of China’s financial and capital market, the uncertainty faced by the financial institutions is gradually rising. Maintaining the stability of the financial market is a significant guarantee for the sustainable development of economy in our country. At the same time, financial innovation, mixed management and Internet banking system, constantly affect the market structure of banking industry, especially in the economy transition stage. The importance influence of banking market structure to the financial stability cannot be neglected. Therefore, optimizing China’s banking market structure to improve financial stability and economy growth has theoretical and practical significance.The paper combines the domestic and foreign studies the effect of banking market structure and financial stability quantitatively and qualitatively. Firstly, the paper elaborates basic theory of banking market structure and financial stability. Then it compares the character of western country banking system and enlightenment of financial crisis and analyzes influence of banking market structure to financial stability. Secondly, the paper analyzes the mechanism of the two variables and finds that it can affect the financial stability through real economy, monetary policy, financial structure and opening. Thirdly, on the basis of theoretical analysis, we explore trend of two variables quantitatively. Finally, according to the empirical results, we make reasonable policy recommendations from the perspective of regulators. Through empirical analysis, the paper argues that the real economy, monetary policy, financial structure and opening have different effects on the financial stability. In the short term, the change of these factors can make financial stability deviate from the equilibrium state, and then return to the initial equilibrium state, which may due to the self-adjustment mechanism of financial stability. In the long term, China’s bank market structure is changing from monopolistic competition to competition. As a matter of fact, the moderate decrease of banking market structure in China has certain rationality and practical significance. Finally, we can improve competition force in the whole market, implement differentiation strategy, encourage private bank developing, deregulation banking system control and interest rate and strengthen supervision of foreign banks to maintain sustainability development of banking market structure and financial stability.