Abstract: Whether the banking system can effectively support technological innovation is the key to China’s transformation of the mode of economic development. A theoretical analysis can see that at the stage of lower technological level, the major way to push technical progress is to introduce and imitate foreign advanced technologies, of which the information is rather transparent and the banks are faced with lower risks. The banking competition is conductive to lowering the credit costs and improving the credit availability, thus the incentive can be increased for enterprises to be engaged in the innovation activities. While at the stage of higher technological level, the way to push technical progress is mainly through R&D innovation. Due to higher uncertainty of R&D innovation, banks are faced with higher risks. Only through its market power to share the R&D earnings of the innovative enterprises, can the earnings match the risks, so as to enhance banks’ willingness to lend to the enterprises’ innovative activities. Therefore, the optimal banking structure should be in favor of monopoly with the technological progress. The empirical study shows that at the stage of lower technology level in China, the improvement of banking concentration is not conducive to technological progress; with the continuous progress of China’s technology, the impact of the concentration degree of the banking industry on technical progress will turn from negative into positive and get stronger. Both theoretical and empirical studies show that there is no difference between the so called good or bad banking structure, the key lies in the matching of the banking structure to the technologic level.

Key words: banking structure; technical progress; marginal effect; panel quartile regression