Research On The Influence Of China’s Social Financing Structure Change On Financial Fragility

With the further development of the financial market in our country, the financial impact on the operation of macro economy is increasing. In 2007, subprime mortgage crisis entirely broke out in America. This financial crisis had a widespread influence and a strong effect which caused a tremendous impact on Western economies. The crisis exposed the inherent instability and risk of financial system. The outbreak of the financial crisis is not accidental, in fact, it was the effect of a long-term cumulation of vulnerability. As China’s economy still maintains a sustained and stable growth and potential competitiveness, Chinese economy now developes with great vigor which can protect our economic system from a certain degree of external shocks. With the deepening of financial reform and financial liberalization, financial fragility in China also gradually and increasingly accumulates. From July 20th,2013, the control of lending rates of financial institutions was loosened overall in China which meant that financial institutions were permitted to set their own interest rates according to the market needs. This reform can help enterprises reduce the cost of financing in a certain degree, and can let financial support plays a better role in economic development. With the deepening of the market-oriented reform of interest rate, the deposit interest rate marketization reform is also planned in China, which will bring a great change to Chinese investment and financing system.Under the new market environment, the way of financing in China has changed from the traditional bank oriented mode to market oriented mode. New financing tools and financing channels emerge in Chinese financial market, enterprises can choose the suitable tool according to their own needs. The change of financing way directly affects the efficiency of the financial market financing and relates to the future development of the enterprise and even the whole national economy. On the other side, the intrinsic vulnerability of the financial industry itself is also changing with the new financing structure. Bank credit financing plays a less role in China’s social financing structure which strengthens financial fragility, while the other ways of financing in the shadow banking system as the representative arise, these new tools harm the financial system stability in some way. The fast development of direct financing of capital market also greatly influences financial fragility which increases the risks in our financial market and aggravates the instability characteristics of the operation process in the financial system. With the acceleration of financial innovation and finacial freedom, potential risks accumulate and can break out with the impact of certain external factors, this will break financial system and even cause economic crisis which harm the healthy development of national economy. Economic and financial globalization has presented a greater challenge to the prevention of financial crisis which requires every country to strengthen financial supervision and prevent financial risks.This paper lays special stress on analysing the influence of the new changes in social financing structure of China on the financial vulnerability in the background of Chinese financial reform. This paper first introduces the forms of financial fragility in China with the adjustment of social financing structure. Then analyses the impact of social financing structure change at present stage in China on endogenous mechanism and external mechanism of financial fragility separately. At last is the empirical analysis and some proposals on the construction of China’s financial system.