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Dynamic Comparison and Difference Decomposition for the Financing Capacity of Finance Industry in China
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TitleDynamic Comparison and Difference Decomposition for the Financing Capacity of Finance Industry in China  
AuthorSu Fang and Chu Liping  
OrganizationFinancing School, Shanghai University of Finance and Economics 
Key WordsFinance Industry, Financing capacity, Financing Channels, Financing Strange Circle 
AbstractIn these years, the premium income of Chinese insurance market keeps increasing fast, which decreases the solvency of insurance. Insurance need more capitals. While, the investment return rate keeps decreasing. This makes it more difficult to increasing capitals. Banks also face the same problem in China. Both of them are in the financing strange circle. Using entropy method, dynamic evaluation, and Theil index, the financing capacity of Chinese bank and insurance market are compared from 2007 to 2010. The results show that profit is the most important factor to determine the financial capacity. Profit increasing rate is most important to attract investment. Non-life insurance has highest financial capacity because of the highest profit increasing rate in the sample years. Bank is the second and life insurance is the last one. In detail, bank has the highest interior financing capacity because of the high and stable profit, life insurance is very bad in debt financing and nonlife insurance performs very well in equity financing just because of the highest profit increasing rate in these years. According with different financing channel, they prefer equity financing very much. Equity financing is most important for them, while internal financing is the worst one. From the differential analysis, the difference of life insurance is very big, while those in bank and nonlife insurance are not very big. Because of the adjustment of market, capital can move freely among companies and industries. The difference from same industries is bigger than those among difference industries. At last, we find that finance industry can break away from the financing strange circle if they develop as improving management - improving profit - improving financing. 
Serial NumberWP469 
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