The Empirical Analysis Of The Influence Of Banking On Industry Growth In China

Since the reform and opening-up, China has acquired great achievements in its industrial development. During the period of 1995-2015 the industrial value added increases significantly from 2827.4 billion yuan to 22897.4 billion yuan. More than 200 hundred industrial products have the largest yield in the world and can be found anywhere. Now China is entering the later period of industrial process from mid-industrialization with the rapid development of industry. And the speed of economic growth is also slowing down for the impact of global financial crisis. So there is a strong connection between the banking system and real economy. In 2003, China launched the stock reform for state-owned commercial bank and made a breakthrough in system and mechanism. Since its founding, China Banking Regulatory Commission has been engaged in the sustained and prudent supervision and establishment of a long-term banking risk management mechanism. In recent years, the number of domestic and foreign commercial banks has been increasing and the competition in the financial services has been growing. It’s easier for business to get financial support as a result. At present China industry is facing the slowdown in economic and great pressure of structural adjustment. In this case, the research that whether bank performance is contributory to industry growth seems to have some realistic meaning.Reviewing the study in home and abroad, there are many literatures on the relationship between financial development and economic growth. Presently, scholars have made attempts to identify specific characteristics of finance that impact on non-financial firms. Yet until now, I find there lack of such articles on the matter of banking performance and industry growth. Some studies have focused on one dimension of banking sector performance that may not yet reflect the performance of banks. So we will examine the effect of bank performance on industry growth in China with the qualitative and quantitative analysis methods.Based on existing research, this article firstly describes the current situation of banking sector and industry in China. In empirical analysis, taking industrial value added and industrial loans to examine their relationship via Granger causality test. Then the real growth of value added for the 29 sub-sector industries is regressed on the banking performance, together with the quantity-based indicators by taking account of the degree of external finance-dependence over the economically stable period 2006-2014. The results reveal that a competitive, efficient and stable banking system is indeed a source of enhancing financially-dependent industries to grow faster. Our empirical results serve to provide a useful insight for policy strategies, for instant, developing private banks, speeding up market-oriented interest rate reform, optimizing credit structure, perfecting the system and means of regulation and so on.