The Research Of The Pro-periodicity Of Credit In China

Financial procyclicality has attracted much more research attention recently,especially after 2008 Financial Crisis.In order to solve this problem,Basel III proposed counter-cycle capital control,a series of management system adjusting the capital legal requirements as the economic trend,which improves the capital adequacy requirements during the economic boom,and cut down the requirement during the recession.This paper concentrates on these questions,(1)Which type of cycle is Chinese credit,and whether the cyclicity of credit departments is the same,(2)What is the consequences of China's credit cycle,(3)Which factors can effectively inhibit the pro-cyclical effect of credit,(4)What regulatory suggestions are for China's financial supervision.Based on previous researches and taking credit cycle and monetary cycle for example,this paper focuses on relations between financial cycle and economic cycle of China.The H-P filtering method separates trend components and volatile components,and the vector autoregressive model(VAR)regress the quarterly time series data from 1996 to 1996.All these examine the existence of a pro-cyclical from China's credit macro level,and illustrates the characteristics of China's macro credit overall impact on the economy.Although financial regulatory authorities have already taken Basel III,which proposed prudent capital regulation and control policy,China's credit still complies with the economic cycle,which is in the period of economic expansion the credit amount rise,and during the recession credit decreased,and pro-cyclical phenomenon has lag phenomenon,lag period is 1 to 2 years.While this pro-cyclical phenomenon amount is not caused by the changes in the investment,production and transaction behavior of real enterprises and the rise in prices,but by the profit-seeking behavior of banks,which in order to meet the accounting standards,regulatory requirements and the compensation system of bank practitioners.The pro-cyclicality of credit increases the default rate in the peak credit area,which has a negative impact on Banks' profitability.In view of the fact that the credit of commercial Banks in China is the main financing channel for real enterprises,the expansion and contraction of credit will affect the output of enterprises through their financing behaviors,thus affecting economic growth and amplifying economic fluctuations,which may eventually lead to a severe financial crisis and economic crisis.At the same time,a strong Granger causality exists between the economic fluctuations and the financial procyclicality,and economic changes are the most effective explanatory factors for credit besides itself.In this paper,the structural vector autoregressive model(SVAR)with the Jollisky constraint was used to test the robustness of macro results.It was proved that the credit procyclicality phenomenon was robust,and the empirical model met the data characteristics and research requirements.In addition,the article further explains the phenomenon of the credit cycle from macro micro level,through nearly 20 years of 27 listed Banks.Through random effects of panel data regression,it is found that the credit and the lag of economic growth have the same change direction,and the pro-cyclical also caused the commercial bank loan default rate cycle.It shows that after the crisis,although the Chinese authorities adopt counter-cyclical capital management concept,the banks still make decision on own risk tolerance and credit approval about economic trends,which results to the credit pro-cyclical phenomenon.Banks characteristic indexes containing bank assets,liquidity,capital cushions in the regression model have the same coefficient as expected,revealing the effective judgment of the banks' characteristic on credit pro-cyclical.We further decompose the credit into enterprise credit loans and advances,residents of housing loans,and personal consumption loans,and it is found that the pro-cyclical of corporate loans is most obvious,and the dummy variable of government management coefficient is significantly negative,which means that five state-controlled banks can significantly reduce pro-cyclical enterprise loans.Personal consumption loans have no significant cyclical,while residents housing loan department is significantly negative with GDP,This is because that personal consumption loans is still in the stage of development now,and banks have been trying to enlarge personal consumption credit market,and that the real estate market has lived in two kinds of investment function,which is of the rigid demand in the process of urbanization.The above results show that the regulatory authorities still need to increase the prudent management policy of credit.The management concept of counter-cyclical regulation should be implemented not only in the five major state-owned Banks,but also in other listed and unlisted Banks.At the same time,different regulatory measures should be adopted for different credit departments.