Abstract: Considering the fact that local governments intervened in bank lending allocation in China, this paper uses the inter-provincial panel data from 2003 to 2015 to empirically investigate the credit allocation effect of interest rate liberalization reform and the influence of local government intervention from the perspective of inter-provincial credit allocation efficiency. The research shows that market-oriented reforms of interest rates help improve inter-provincial credit allocation efficiency, but intervention of local governments significantly interferes with the commercial orientation of bank lending;the negative impact caused by local government intervention is so significant that it offsets the positive effect of credit allocation brought by interest rate liberalization,as a result, even excluding the likely impact of special credit policies during the financial crisis, commercial banks have failed to rationally allocate credit funds among provinces, and the inter-provincial allocation of credit resources is inefficient on the whole.

Key words: interest rate marketization, local government intervention, credit allocation efficiency, credit behavior of commercial banks, inter-provincial credit allocation