Developing China's Real Economy: Efficiency Evaluation and Resource Allocation of Financial Services

ABSTRACT Unlike the available studies focusing on either the regional or corporate level, in this study, we examine financial service at the industry level, in hope of better developing China's real economy. In our data envelopment analysis‐based approach, we first evaluate the efficiency of available financial services in different industries contributing to China's real economy. Subsequently, based on the efficiency evaluation results we optimize financial resource allocation, this alleviating misallocations in the real economy. We demonstrate our approach using data pertaining to financial services in 16 major industries in China. The results highlight significant differences in the efficiency of financial services in different industries. Several industries, such as the information transmission, computer services and software industry, and the education industry, have higher financial service efficiencies, while other industries, for example, the transportation, warehousing, and postal services industry, the wholesale and retail industry, have lower efficiencies. Regarding this, it is necessary to optimize financial resource allocation to improve financial services. In addition, we point out that excess financial resources (e.g., stock trading volume, loans) should be reallocated from, for example, the construction and manufacturing industries to others, including the agriculture, forestry, animal husbandry, and fishery industry and the mining industry. Our results also reveal that the shortage of certain financial resources seriously affects the financial service efficiency. Based on the results, we offer policy recommendations to facilitate financial service improvement. For instance, Chinese government should make efforts to promote collaborative development among industries and to reduce the financial service efficiency gap in different industries.