Research On The Relationship Of China Financial Development And Economic Growth

The finance is the core of modern economy.The financial development has the special function and the significance to the economical development.In particular,In the view of the financial crisis which was caused by the American sub-loan crisis from July 2008,,the relationship between financial development and economic growth is not weakened,but strengthened in the current social.,To get out of the current financial crisis and achieving sustained,healthy and rapidly development in this transition of Chinese economy,we have to grasp the relationship of financial development and economic growth,.We also have to build the modern financial system and the operating environment in order to adapt to the rapid economic growth. Therefore,the theory and practice of in-depth study on financial development and economic growth is important practical significance.This paper is consisted of five parts,and maily studied the relationship of Chinese financial development and economic growth.Part 1,2:introduces the development process and major schools of the financial development theory,and points out that the financial development indirectly affects the economic growth through directly effecting on the determinants of economic growth.Part 3:analyses the interaction mechanism of financial development and economic growth,and points out that financial development affects economic growth by the ways of savingsrate,the converision rate of savings-investment,and the ratio of the marginal productivity of capital.Part 4:uses factor analysis method of financial development and economic growth of Beck(2000),andbased on data from 1989-2008,this article has an empirical studies on the General impact factors of economic growth,by empirical analysis combining normative analysis and qualitative combining quantitative analysisThis article selects five financial development indications which is more fit to our country's reality:M2/GDP;PC(The ratio of enterprises private credit to GDP);CR(,The ratio of Financial intermediation credit to GDP);CCB(The ratio of Domestic assets of commercial banks to the sum of domestic assets of commercial banks and the Central Bank;),Rd(Rate of saving).Economic development quantity indications:GY;I/GDP;K/GDP.Economic development quality factors:GA;MPK.This article has two innovation:First,this article uses the data from 1989 to 2008, and 11,factors target,large sample,new date.Second,in order to better explain the financial impact on the way to economic growth,according to Beck et al(2000) Financial Development and Economic Growth factor analysis methods,this article divide the affect factors of economic growth into quality and quantity,the analysis is more completely.Through theoretical and empirical studies,the paper concluded that financial development has significantly effects on investment and capital accumulation,but has negative or not singnificant effects on the quality fators of economic growth,such as MPK,GA One side,financial development on the quantity factors of economic growth-investment and capital accumulation has a significant positive impact,but on the other side,the quality of economic growth factors(MPK,GA)is negative or no significant.Because the negative impact on quality factors offset the positive impact on the quantity factors,,the overall impact on economic growth is not significant.This is mainly with the characteristics of financial development:the expansion of financial institutions to scale up which made the increase of the quantity of the target-investment and capital stock.But,on the other hand,there is much government intervention in the financial development,The intervention lowed the save of the financial system,and made the allocation of resources not fully exert the function,thus making inefficient investment,technological progress becomes slowly,and affecting the quality of economic growth improve.Therefore,this paper finally suggested that we should promote the reform of financial markets,improve competition of the financial institutions,enhance financial system efficiency in the allocation of resources.