Financial Intermediaries, Financial Markets And Economic Growth

Finance is in the core of modern economy, and the ultimate object of Chinese Financial Reform is to make finance play its vital role in the course of Chinese economic growth. Based on these knowledge, this paper firstly introduce some theoretical models about the mechanisms through which finance has its effects on real economy, then this paper empirically study the relationship between finance and real economy in Chinese economic system from the perspective of the theory of financial development. Three problems are focused on in detail: first, the characters of the developments of bank system and stock market and the comparative structure of bank system and stock market as they change together with the changes of Chinese economy; second, whether the developments of bank system and stock market and the comparative structure of bank system and stock market are one of the determinants of Chinese economic growth or not; third, the causality between the development of financial intermediation, financial markets, or financial structure and economic growth in China.And the empirical results of the three problems can be summarized briefly as follows: (l)In the long run, bank system, stock market and the total financial system of China are getting larger gradually; but at the same time the total financial development also reveals fluctuations in the short term as the stock market fluctuates periodically. Since the introduction of stock market in 1991, the part of stock market does not become larger compared to it of bank system, the importance of stock market in financial system does not get greater. (2)Financial development is an important determinant of output and investment, and it has positive effects on output and investment. But financial structure is not a vital determinant of output and investment. (3)In Chinese economic system, finance can also stimulate the growth of real economy actively, but this positive effect is the result of the development of bank system. And the data do not provide evidence for the positive effect of stock market. There is no causality between financial structure and real economy.