Studies On The Financial Development Of China's Territory

The relationship between finance and economy which has arrested incredible attention is the most favorable research field for mounting numbers of scholars at home and abroad. They have conducted in-depth and meticulous research as well as putting forward many different views and theories. Numerous tireless scholars who are attracted by contradicting and similar views try to explore the real situation of the relationship between finance and economy. The existing research outcomes provide a good theoretical platform for this paper. The imbalance between regional financial development and regional economic growth as well as the exploration of the relationship between financial development and economic growth evolve as the focus of research. Whether or not there exist some kinds of association between the imbalance in regional economic development and the imbalance in regional financial development? Can we improve the imbalance of regional development by means of modifying the relationship between the two? Followed firmly by serious problems of regional imbalance, tremendous development have witnessed years of China's reform and opening up. The Party and the country put forward the decision of building a harmonious society and strengthening the country's financial security in the new era. Therefore, This paper concerning on China's regional financial development is of great theoretical and practical significance.On a basis of existing research outcomes at home and abroad, concentrating on current development environment and stage of China and rationally taking advantage of relevant theory and calculation, this paper carries on theoretical and empirical research on the relationship between China's regional financial development and regional economic growth as well as on the macro financial background of regional financial development,regional financial and economic status,national regional policy,regional finance controlling and risk monitoring which have an impact on China's regional development. Finally, we turn to Jilin Province which is one city of old industrial bases in northeast and propose specific policy recommendations of financial development.Specifically, this study is outlined as follows:In the first place, this paper introduces a comprehensive research literature of the regional financial development, including finance structure theory, finance inhibition theory, finance constraint theory overseas and domestic research results which have a bearing on regional financial development. Domestic investigation consist of the relationship between regional economic growth and financial development,regional financial regulation,risk monitoring reform and development strategies. On the ground of the review of fruitful domestic research work and multi-dimension exploration, we draw a conclusion that a more detailed study is necessitated terribly owing to data expansion, new phenomenon emergence and novel application and development of empirical methods.Secondly, taking a foothold from two perspectives of mathematical studies and empirical studies, this paper works over the relationship between China's regional financial development and regional economic growth. Substantial scholars found that as an important independent distribution element of economic resources, financial system has an important impact on long-term economic advancement, just the same as capital, labor and other traditional production factors. In connection with the relationship between regional financial development and regional economic growth, we have to reply to three essential questions. They are listed as follows: Why regional financial development has a role in accelerating the region's economic growth rate? What is the exactly correlation between the developing pace of regional finance and the growth rate of this region? Why the level of development in the region has a sway on the economic growth rate? In this regard, we conducted the following mathematical analysis, creating of the expansive Solow model: the speed of economic growth is equivalent to the pace of development in the region in the context of steady-state economy. Namely, g *y = g k* = g c* = g F* = (β?ρ) (γ+ 1), Before the economy reaches a steady state, as a key influencing factor of region's economic growth rate, regional financial development pace is constrained by the financial development level of this region. That is F =βuF. By virtue of establishing three-stage overlapping generation model, we can find that when the economy is in a steady state, regional economic growth depends on the level of financial development in the region. The growth rate(μ= R(1 ?θ)ψ(Φ1 +Φ))of regional economy which possesses a perfect financial intermediary is greater than the one(μ* = R (1 ?θ)πθqt*) which is in the absence of such financial intermediary. Before the economy attain the boundary of steady state, the development level of regional finance work on the region's economic growth rate. Integrate two conclusions mentioned above, we point out that before the economy reaches a steady state, the magnitude of impact is restrained by the financial development level of the region, in other words, there is a threshold effect from the angle of theory.In response to above mathematical analysis, we apply panel threshold model to China's data. The acquisition of data comprises economic output, the price index, fixed assets investment, household consumption, population statistics, all deposits and loans in regional financial institutions of China's 31 provinces from1990 to 2004. Through the estimation and test of threshold model parameters, we discover that the growth rate of regional investment and consumption has positive correlation with the actual growth rate of regional economy. Investment is in a slightly less important position than spending. The development pace of finance contributes to economic growth rate much more than consumption and investment; there lie three district systems: a lower level, middle level and high level district system throughout China. A large number of lower-level financial development provinces can be found in China, they belong to district system II, financial development rate act the biggest role in the growth rate of economy. It is high time for relative poverty areas to catch up with the wealthy ones. Areas which can be grouped into district system I, there may be a negative correlation between financial development pace and economic growth speed. The threshold effect of three areas is dramatic, which can tell us that when we pursue to speed up the economic growth rate in the backward areas, we should avoid relying on the role of investment and consumption, but emphasize the function of region's financial development, particularly up to a certain level, that is, when the level exceeds district system II threshold. Tremendous multiplier effect is created at this time which is conductive to economic rapid development, finally keeping up with the affluent regions.Thirdly, we deploy an analysis on China's financial reform and regional finance development; launch a review and analysis on China's financial reform and evolutionary process, develop descriptive study of the non-balanced financial status in nation's eastern, central, western region. Preferential policies, opening-up extent, different ownership structure, "Matthew Effect", regional distribution of security market, local government's surplus capacity and financial supporting policy are prominent reasons for non-balanced development of regional finance. In accordance with state policy, we perform specific analysis on regional financial, taxation, investment, monetary and other economic policies which are extremely important and influential. A research follows in the steps of the discussion of the necessity of China's regional financial control and regional financial risks monitoring, which can be classified into characteristics of regulation and control, objectives and components, monitoring objectives, features of regional financial risks, the setup of monitoring system. This paper indicates that regional finance can rely more on direct control mediums. In view of the credit structure and quality of regional economy, we can count on directing the direction and purpose of credit to achieve the control objectives, employ regulation and control tools, such as direct credit control, real estate credit control and consumption credit control and bring up with proposals of improving organization structure, information exchange system and crisis management system.Finally, Based on the exploration of financial development in Jilin Province which is an old industrial base in northeast China, we propose the following suggestions directing on future development from eight angles of banking, rural finance, capital market, insurance, financial services innovation, the development of financial intermediation, financial development environment and the leadership of financial work: Making use of market forces and government power,promoting the rapid development of the finance industry and enhancing its radiance and cohesion to the entire Jilin Province as well as Northeast region, We develop a target of creating Changchun to a financial regional hub, and take pains to establish the financing center, fund settlement center and financial information center within Jilin province and Northeast region; Formulate the objective of achieving regional financial security in Jilin Province from six aspects and establishing a basic framework for financial security district; As to the government, we hold that they should strengthen the power of policy support for financial development, set up special funds to the development of financial industry, lend a hand to the development of small and medium-sized financial institutions, and promote financial institutions to expedite the disposal of non-performing assets, and implement financial measures to bring in and cultivate elites. The recommendation of actively joining hands with banking institutions for the Jilin Provincial government in order to shape a win-win situation equipped with benefit-sharing and risk sharing should give top priority.