Credit expansion and concentration in China based on GMCR

Abstract

This paper establishes a GMCR model involving the central government, commercial banks and local governments and examines the states and stability with our unique MRSC decision system. We find that firstly, GMCR can be employed to analyze some conflicts in the financial field, and it could provide help for decision makers to predict and manage conflicts. Secondly, we can see the inevitability in the formation of credit expansion and concentration. The conflict essentially arises from the fact that central government try to balance the economic growth and systemic risk while keeping the economic growth mode unchanged. Thirdly, in order to solve the credit expansion and concentration problem in a fundamental way, the central government needs to carry out reforms on the supply side and remodel the relationships between governments and economy.