Institutional Preference For China's Commercial Banks And Credit Research

With the continuous deepening of the reform and opening policy in China, micro-economic agents has gradually become the main force of economic development. Against this background, the commercial banks has transformed from the cashier who passively obeys government directives into the "independent" financial body who seeks profitable growth. In the advancing process of economic transition, the behavior of commercial banks has always been the concerns of the public, particularly in the credit expenditure markets. In recent years, in order to improve the operating efficiency of banks and to guard against financial risks, commercial banks show the very similar "preference" on credit expenditure: implement intensive management generally from the operating funds, authorized investment and credit direction, which use the limited resources on central allocation so as to guarantee a lot of credit funds to loan and invest in long-term approach focused on the big cities, large enterprises and large projects. In terms of a bank, the credit expenditure preference does not mean irrational or inefficiency, but the rational response to the credit environment in the context of economic transition uncertainty. In the credit decision-making process, the bank must look for methods to reduce uncertainty actively in order to seek greater efficiency. However, as to the whole banking sector, this preference will generate the overall blind obedience in credit expenditure, which makes the followers of the market underestimate the credit risk of the industry and create a "credit illusion", resulting in rapid inflow of the credit in some sectors, rapid expansion of industry capacity, and the excessive industry supply. All these will lead to great waste of resources, like credit resources, natural resources, human resources etc.This essay will be based on domestic and foreign study on commercial bank expenditure credit and relative behavior, from the macro and micro perspective, combined with the background of China's economic system transition and banking reform situation, to analyze the commercial banks credit expenditure preferences. The essay consists of the following five parts:The first chapter is an introduction, which proposes the research background and its significance, defines the institutional preference of credit expenditure and summaries the research results, ideas and methods. The second chapter analyses the status of institutional preference to credit expenditure, mainly describing the seven specific performance, and its positive and negative effects in this field. The third chapter analyses the causes and effects of the institutional preference to credit expenditure in the financial repression and economic transition perspective. The forth chapter has the empirical analysis of the institutional preference to credit expenditure and commercial bank risk and return, through the data analysis of the 2007-2009 credit in 16 listed commercial banks in China. The fifth chapter proposes the policy recommendations that relieve the institutional preference to credit expenditure.