A Brief Probe Into China's Financial Structure 1992-2005

Economic development accompanies financial development, which vice versa will be an important impetus to further promote economy. To further understand a country's financial structure and development level is the starting point of studying its financial system. Therefore a series of suitable index is required to weigh the stage of financial development. Different researches show that, the most complete and abroad recognized index system is the one built by the American economist Raymond W Smith in 1969, which is the theoretic foundation of this paper to analyze China's financial structure and development.This paper first discussed the western theory of relations between monetary finance and economic development, and then it made a review of the index system proposed by both domestic and overseas scholars, which is followed by the new issuing and financing process of five institutional sectors, together with the analysis about China's financial system according to the numerical indicators and trends as reflected in China's financial structure, status and development trend. The FIR has been calculated since 1992, which led to the following conclusions: from 1992 to 1995 China had been experiencing the intermediary stage of financial development, while from 1996 to 2005 China has been going through the non-steady stage of financial development.In this paper, the innovation is the empirical analysis of China's financial structure based on Goldsmith financial structure and development theory and index system, along with the financial transaction of flow of funds accounts. Unfortunately, the gross classification of institutional sectors and financial instruments makes the analysis of several key indicators in Smith's index system hard to reflect in China's financial development status. Thus further studies are needed to strengthen the practical use of flow of funds table in analyzing China's financial structure and development.