A Study On The Relationship Between The Development Of Banking Industry And The Economic Growth In China

Because of the important status of China’s banking sector in the national economy,this article will focus on the relation of the regional banking sector development and the regional economic growth. When considering the present development situation of the banking industry, we can’t just stay on the accounting or management index, and should look for a more macro perspective. This study attempts to find out reasonable answers to the problems as:What effect does the development of China’s banking industry has to the economic development in this nation? Which features of banking industry can significantly affect the economy development? Is there any difference of the influence in different regions? How to make the Banking industry serve the entire national economy better?This article includes six parts, of which the first part simply introduces the background of this study, the development process of China’s Banks, and analyzes the current financial and banking industry structure. Based on the People’s Bank of China and CBRC’s standards, this part has made clear definition for the "banking industry". This is a general standard of "banking". The first part has also clearly introduced the article framework, the relevant theories and research methods.The second part of the article has introduced the literature review. Due to that the banking sector is one of the most important part of the financial sector, when we try to study the relation between the banking industry and the growth of economy, we firstly refer to the financial development methods. But, due to the characteristics of the banking industry in the financial system, studies of the development of the banking industry also appears frequently. These studies play an important role for subsequent analysis, so the article has introduced some of them with details.The third part of the article is trying to analyze the banking sector’s effect on the economic system based on the main activities, and the function of the industry. In theory, the affect of banking institutions to the whole economy should include both direct and indirect ones. First of all, as an important part of the economy, while banking industry has increased output, it would directly contribute to the economy growth. Second, since of the function of the banking institutions, the convenience, the savings accumulation effect, the management of risk, it can indirectly affect the speed of economic growth. To promote economic growth, the premise is that banking institutions has been running effectively, which is an ideal state.The fourth part focuses on Chinese banking industry’s current status and characteristics. It has introduced characteristics like:the structure, operation scale, profitability and stability of banking industry. On the basis of theoretical analysis, the fifth part uses the panel data, and finally has established a mathematical model in which the economic growth indicator has been explained by the banking industry scale, the structure index and the controlled variables. The Final conclusion which is in common with most of the similar studies showing that the expansion China’s banking industry has negative effect to the economic growth, as the banking concentration. The last part which is based on the previous analysis, try to make a review and to conclude the study.