Bank-based And Market-oriented: Developing Countries' Financial Development Model Of Choice

The developing countries financial systems have the characters such as division of the system, the low developed financial intermediaries and the lagging financial market. This financial system limits the economy growth, which asks financial deepening and improvement for the developing countries. With the growth step entering into the take-off phase, financial system in the most developing country should allocates resources concentrating on the economy growth. Financial system of the developing countries was experienced the Man-made process, not from the Natural Collection. Formally, it looks like the bank- based financial system, but actually, the mechanism need to be completed and improved. China, as the maximized developing country, is under-going fast progress and transition. So the financial problems are more serious. Concerns to the most developing countries, the collection of financial system is critical.This paper starts with the comparative of bank- based and market- based financial system. Firstly, Chapter 1 introduces the common theories, including the reasons to the different development patterns and the functional difference. Secondly, we consider the developing countries and analyze the specialty of their financial systems. Thirdly, we argue the Chinese case as a representation to analyzing the status, problems and the future development.One country can choose one kind of financial system, but this pattern could emphases on the different aspect in each step. The combination and mutual complementary of bank and market can be variously, if only this pattern can promote the function and improve the efficiency. China's financial system needs to transition to the modern bank- based according to the history inevitability, and also need to prepare for the market- based development in terms to the special request. So we conclude that China will deepen the bank- based way, which requires improving financial market, strengthening market function and intensifying the mutual combination with market.