Banking Sector Structure And Credit Rationing: Theory And Evidence

In the credit market, small and medium enterprises are the main group which suffers heavily from credit rationing. As those enterprises play an important part in our economy, the government has taken many measures to solve this problem. However, the effects are not favorable. This paper tries to analyze the relationship between banking sector structure and the credit rationing in China, and give policy suggestions accordingly.First, this paper describes the history and actuality of the banking sector in China, points out the evidence of credit rationing, and analyze the factors which restrict the development of small banks. After that, it analyzes theoretically how the banking sector in China affects credit rationing and explains its mechanism. And then, it formulates an OLS model to further analyze and testify the relationship between banking sector structure and credit rationing. Finally, it draws two main conclusions and makes three suggestions.The two conclusions are as follows. First, there is not only equilibrium credit rationing which is connected with the market structure of banking sector, but also disequilibrium credit rationing which is connected with the ownership structure of banking sector. Second, the more concentrated the banking sector is, the more serious the credit rationing is.The three policy suggestions are as follows. First, abandon those restrictions which prevent private capital from entering the banking sector. Second, raise the upper limit of the interest rate. Third, legalize the underground finance and administer it properly.