BANKING SYSTEM EFFICIENCY AND CHINESE REGIONAL ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS BASED ON BANKS’ MICRO-EFFICIENCY

Based on the cost efficiency of individual banks, this paper constructs an indicator to clarify Chinese regional banking system’s credit allocation efficiency in accordance with the panel data of the provinces and central-government-administered cities of China. When applying this variable into the growth equation and estimating the regression, the results demonstrate a strong positive relationship between the regional banking systems’ efficiency and regional growth rate. This paper presupposes that the indicator of the banking system’s efficiency bears a direct relationship with the banking system’s capability of identifying promising entrepreneurs and optimizing credit allocation. Thus, it could be concluded that the banking system can exert their influences on the process of economic growth not only through capital accumulation effects but also through credit allocation effects.