The Impact Of Macroeconomic Factors On Non-performing Loan Ratio Of Commercial Banks In China

In recent years,the balance and the ratio of non-performing loan have being on the rise.It not only affects the asset quality and profitability of commercial bank,but also impairs the ability to support the market economy from commercial bank.Our country's financial system is mainly based on indirect financing which regard bank as main intermediary,and partially based on direct financing by issue shares and bonds.Once our country commercial bank credit crisis happens,the financial system will go to collapse,and the real economy will drop as sharp as Japan's in the 1990 s.Therefore,we should pay more attention to the problem of the non-performing loan from commercial Banks,and figure out what and how make the non-performing loan ratio go up.Doing some useful research on non-performing loan is of great importance for the development of commercial banks and the financial markets in China.There are many influencing factors of an industry development,most of them could be felled into two categories: the macroscopic factors and the microscopic factors.Under a certain control of micro factors,this paper mainly studies the macroeconomic factors on non-performing loan ratio of China's commercial banks to figure out how those make the non-performing loan ratio go up,and find solutions to deal with the problems.First of all,this article elaborates on the basic situation of the non-performing loan ratio of commercial banks in China,including the concepts definition of non-performing loan ratio of commercial banks,the history about supervision and management of non-performing loan ratio of China's commercial banks,the situation about non-performing loan ratio of China's commercial banks,and the impact on macro economy of our country from non-performing loan ratio of China's commercial banks.Secondly,the article discusses about how the economic growth,the inflation,the unemployment,the monetary policy(money supply(mainly refer to M2 growth rate and the interest rate)affect non-performing loan ratio of China's commercial banks from the theoretical side with the western economic theory,money and banking theory,and characteristics of the facts of macro economy and the non-performing loan ratio For nearly 10 years in China.We also find out reasonable indexes to quantify those macro-economic factors for next part.Then,we discusses about how those macro-economic factors affect non-performing loan ratio from the practical side with the VAR model.Eventually,we choose the GDP growth rate,the money supply(M2)growth rate,the consumer price index,the unemployment rate,the one-year loan interest rate to be explanatory variables,choose the Capital adequacy ratio,the asset-liability ratio,the liquidity to be control variables,choose the non-performing loan ratio to be explained variable.Some important conclusions are elicited from the VAR model which tested through stationarity test,cointegration test,granger causality test,impulse response function and variance decomposition analysis.The results prove that: firstly,in our country,the GDP growth rate has cyclical impact on the non-performing loan ratio of China's commercial banks,and the contribution is larger.In the beginning,the non-performing loan ratio of China's commercial banks is increased as the GDP growth rate raising.But after a period of time,the non-performing loan ratio of China's commercial banks will fall as the GDP growth rate raising.It's determined by the characteristics of the facts of our country economic growth from 2006 to 2016.Secondly,the money supply(M2)growth rate has the reverse affect on the non-performing loan ratio of China's commercial banks.As a rule,increases in money supply,means increases inflows of money into the overall market,so the enterprises can borrow much more funds from bank easily.The benefit of the enterprises will go up when the enterprises increase social investment,and it relieves the repayment pressure.Thirdly,the consumer price index has the reverse affect on the non-performing loan ratio of China's commercial banks,and the contribution is larger.The mild inflation is advantageous to the enterprises,farmers,and government in some cases.For the enterprises,goods price goes faster than the wages,the salaries,the rent,the interest and some other cost.For the farmers,thanks to the lack of elasticity of agricultural products,the food prices usually grow much faster than other prices.When the companies benefit from inflation after production,they will increase investment,while the farmers have more disposable income,they will increase consumption,it makes great contribution to economic growth which can reduce non-performing loan ratio of China's commercial banks.Fourthly,the unemployment rate has the parallel effect on the non-performing loan ratio of China's commercial banks,and the contribution is larger.Whether short-term or long-term unemployment will directly makes profits of enterprises and personal disposable income is reduce,thus affecting the subject's ability to repay.Fifthly,at the beginning,the non-performing loan ratio of China's commercial banks on the rise with the lending rate rise,but from the point of long-term trend,the lending rate has the reverse effect on the non-performing loan ratio of China's commercial banks.Because lending rates rises means that the cost of financing become more expensive,and the financing subject will be more cautious about borrowing,and put the money into effective investment of the project to ensure that as low as possible repay loans.Sixthly,the commercial bank's own micro factors also have influence the on the non-performing loans.In order to reduce the non-performing loan ratio of China's commercial banks,this article argues that the commercial banks should keep the rate of assets lower,while keep the liabilities and capital ratios higher.Finally,based on the theoretical analysis and the empirical analysis above,we will give some suggestions and counter-measures on settling the problem of the non-performing loan ratio of China's commercial banks from the aspects of national macro policy,the lenders and the borrowers.Under the national macro-policy,we should look for new impetus to push the economic grow up in the new normal,make and implement effective monetary policy,solve the dilemma of current structural unemployment,improve laws and regulations related to non-performing loan ratio of China's commercial banks.For lenders,we should pay attention to the changes of macroeconomic and lending rationally,Perfect the credit management mechanism and the risk management system,do great job on non-performing loans securitization to solve the existing of non-performing loans.For borrowers,we should strengthen the management of enterprise moral hazard and financial risk warning,and also Strengthen loan usage survey,increase the intensity of late payment penalty.