Study On Interaction Between Financial System And Economic Efficiency In China

Since reform and opening up policy was adopted in 1979,China hasachieved great accomplishments. The development speed has been theone of the fastest ones in the world and people have greatly bettered-off.However, China's economic develop model has been the quantityoriented one which is characterized by high input and low outputs. Thismodel has put great pressure on its natural resources and environmentthat cannot support the economic development of this way for long. Thinsmust change.In the changing process, the finance system will play a vital role. Anefficient financial system can allocate the limit resource to the mostefficient sector and producers, thus the social welfare can be maximizedwith little waste. China's finance system performs very badly in thisrespect. It contributes little to the improvement of the economy and itsown efficiency is also terrible. To probe why china's finance sector is likethat is a very meaningful task.Followed the brief introduction to the implication, current situation andmethods of the study, this article begins the exploration through fivechapters.Chapter 1 introduces the basic theory about the relation between financeand economy. The main parts are contributed to the theory of EdwardShaw and McKinnon. Based on these theories how the financingactivities enhance the economy efficiency is summarized.Chapter 2 briefs the economy efficiency situation in china since 1978, theterrible producing and allocation efficiency are stressed to reveal china'squantity oriented development model.Chapter 3 describes china's finance sector efficiency. There are threeparts here: macro finance financial institutes and financial market. Byvertical and horizontal comparison, we can find its efficiency is also low.Chapter 4 analyzes why and how the finance system has supported the low efficient sectors for so long, so the quantity oriented development model can last. Also in the chapter, the reason why finance sector efficiency is low is revealed.Chapter 5 is the last part, contributes to the policies on how to tackle the problem revealed above. The policies go to three parts: finance sector, real economic sector and their relation.