The Analysis And Empirical Study Of The State Owned Banks During The Economic Transition

The fragility of the state owned banks in the transitional period is an issue in hot discussion. The problem is more striking to China, a developing country in the process of institutional transition. Till now, there is no systematic and comprehensive study of such problems as what's the extent of the state owned banks' fragility, what's the root of the fragility, and how to avoid and ease the fragility. So, the study on the state owned banks' fragility is of great theoretical and practical importance.The banking crises caused by banks' fragility happen more and more frequently and widely. The crises last longer and longer. The crises become more and more costly, and more and more difficult to solve. The banks' fragility has a negative externality, which may lead to market failure, the inefficient allocation of resources and Pareto inefficiency. Presently, China is in the process of great economic and financial reform, which has led to a lot of uncertainty in the economy. Especially after China's entry into WTO, China has quickened the opening policy. The institutional risk becomes greater. To maintain the financial system's stability and development is indispensable to the future development of China's economy. The banks' fragility should be viewed in the perspective of the sustainable development and national security. The importance can be never overestimated. Finance is the core of modern economy, while bank is the core of the financial system. The banks' security is the core of the national security. The object of studying the banks' fragility is to prevent the banking crisis and improve the efficiency of the allocation of banks' funds. The object of facing the problem of the banks' fragility is to solve the present difficulties faced by China's banks and to help China's banks to get out of the difficulty earlier. So, it is of great practical meaning to study banks' fragility and to fully exploit finance's "accelerator" function in economy, so to maintain the national economic security, political and social stability.Banks' fragility theory is a brand new banking crisis theory. This theory is different from the traditional theories, which emphasize the fundamental factors. Fragility theory emphasizesthe intrinsic fragility of the banking system and tries to find the root of the banking crisis from the banking system itself. According to this theory, the banks' features have led to the banks' intrinsic instability and the market's imperfection. The paper begins from the proving of the banks' fragility. At first, we will comb the theories on the banks' fragility in order to find the causes from the perspectives of the transitional period and the institutional contract. Then we will make an empirical analysis on the banks' fragility. The main points of this paper are the state owned banks' fragility prediction model and the path selection of the model's solution. We have raised the hypothesis of multiple institutions' defects to explain the excessive fragility of China's banking system. We have emphasized not only on the common factors of the banks' fragility, but also on the particular factors in China's economic transition, such as the property right system and the government action, etc. In the end, we have put forward some suggestions in order to improve the stability of China's banks.This paper, using both the empirical and institutional methods, is one of the earliest studies analyzing comprehensively China's state owned banks' fragility. We have analyzed empirically China's state owned banks' fragility from 1978 to 2000. We have not found the relevant literatures. The generation mechanism of the banks' fragility has been studied theoretically; the causes have been analyzed empirically. Based on these, we have found the key factors deteriorating the problem of China's state owned banks' fragility and identified the sources of the bank's fragility effectively, which has enhanced the theoretical study and empirical analysis to a higher level. Our study has certain theoretical value and high practical value. We have raised the suggestions of improving the present state owned banks' fragility and preventing the further accumulation of the banks' fragility which may well lead to the bank crisis. The suggestion is of high value for furthering bank reform.Above all, the fragility of the state owned banks is a brand-new problem. This dissertation is only a try. There are a lot deserving improvement and further research.