Research On Financial Structure In Economic Development In China

Since reforming and opening-up, with the continuous improvement of financial system, China's economy has gained the success that attracts worldwide attention. In China, as we know, financial system has transformed from "great unification", which is before reforming and opening, to a comprehensive system with multiple financial instruments. It is obvious that banking industry plays a significant role in dominating our country's financial capital allocation, while the stock market still needs to improve no matter in the scale or the function, due to the immature of the stock market development. Therefore, it can be said that China is in a financial structure dominated by banking. It is worth to examine what kind of roles financial structure has played in promoting the economic development and it will provide a certain theoretical basis for China's economic construction and financial structure adjustment.In this paper, financial structure means financing structure provided by a country's financial system, that is, the composition or proportion of the indirect financing (banking market) and direct financing (stock market). By reviewing the relevant literatures about financial structure, analyzing the current situation of financial structure as well as the basic relationship between financial structure and economic development, we have the framework of this paper that economic development can measure from two aspects, one is efficiency, and another is justice. The efficiency can measure from economic growth, industrial structure and innovation. The justice can measure from National Happiness Index.In the research of financial structure and economic growth, this paper constructs two sectors, enterprise and financial intermediaries, and solves its static equilibrium condition, in order to obtain the possible relationship between the financial structure and economic growth. With provincial panel data from1994to2009, it constructs a Panel Vector Autoregressive Model and empirical examines the relationship of economic growth, bank market, and stock market. After that, it also introduces resident's disposable income variable and constructs Panel Vector Autoregressive Model with four variables, to further test the relationship between economic growth and financial structure. It finds that positive bi-directional effects do exist between bank-based financial structure and economic growth. However, economic growth has a greater effect on bank and stock market, while bank and stock market has a less effect on economic growth. Furthermore, in the regions with rapid economic development, financial intermediaries has greater impact on promoting economic growth, while in the regions with slow development, financial markets has positive effect. For the effect of resident's disposable income, it should be pointed out that resident's disposable income has a greater effect in the developed region, while in the underdeveloped regions, the effect could be ignored.In the research of financial structure and industrial structure, by constructing two sectors (manufacturing and services) and a individual theoretical framework with entrepreneurial ability and savings, this paper states how this two sectors financing the funds by considering the financing cost and the effects of financial structure on industrial structure. With the provincial panel data from1994to2009, it finds the effect of financial structure on upgrading optimization rate and upgrading quality of industrial structure, by constructing the model of industrial structure upgrading and financial structure and adopting system GMM estimation. The research points out:the development of provincial level of stock market does not have significant effect on industrial structure's optimization rate index for measuring the total change of industrial structure, however, the development of stock market has a significant positive effect on R&D expense, which is measure the quality change in the industrial structure; Credit scale of banking has a significant positive effect on industrial structure's optimization rate, however, it does not have significant effect on R&D expense. The negative correlation coefficient indicates the credit funds of bank may not enter into the regional or enterprise's research and development at most of time, it may possible enter into the production enlargement area, or form repeated construction through over investment.In the research of financial structure and innovation, by constructing a theoretical framework of innovation activities, which is conducted by investor, this paper not only points out the external financing has effect on innovation, but also further explains that the financial structure has possible impact on innovation activities. With the provincial patent data from1998to2009, it analyzes the effect of financial structure on innovation and constructs a model of innovation and financial structure, by using two sides fixed effect method. The research indicates:the financial structure plays an important role in supporting the innovation interaction and it provides a certain external financing for innovation activity. In the long run, bank market will provide necessary financial support for innovation activities, while such relationship in the stock market is not significant. In the short run, the role of stock market becomes significant. Therefore, it is obvious that financial structure will provide different support for different innovation activities. It can be said that invention, utility model and appearance design are innovation activity which is ranged from hard to easy, and the support provided by bank market is also from hard to easy. On the other hand, in recent years, bank market has less effect on utility model and appearance design, while stock market has significant effect on supporting innovation, especially in aspect of utility model and appearance design.In the research of financial structure and National Happiness Index, this paper built the evaluation system of NHI and calculated with factor analysis. Then, with the time series data from1994to2010, it analyzes the effect of financial structure on NHI and constructs a model of NHI and financial structure, by using robust OLS method. The research indicates:the financial structure provides a certain but not obvious positive support for NHI, pluralism financial structure is benefit to improve the NHI, increasing the gross financial instruments may have positive effection to NHI.According to the above theoretical analysis and empirical study, this paper puts forward some policy suggestions of financial structure adjustment on China's economic development. Obviously, bank-based financial structure is the strategic choice of financial structure adjustment, and financial legal system is the basic guarantee. Therefore, gradually perfect the modern commercial banking system becomes the most important point in the financial structure adjustment, it is necessary to develop a diversified stock market to adjust the financial structure in the future.