Financial Deepening Theoretical And Empirical Analysis

With the Chinese market reform improving, the financial industry has become one of the last fields that are incompletely marketized, the promotion of the marketization reform essentially call for deepening financial reform, thus the following few years should be a critical period to push the financial reform.This paper 1) systematically studies on the existing financial-deepening theory and the market mechanism in the process of financial deepening; 2) analyzes the reason of inefficiency of the financial deepening with the statistical method, which could provide a empirical evidence for the combination of the financial-deepening theory and the practical financial operation; 3) brings about the feasible policies tailored to the loss of financial efficiency. Therefore, on the basis of learning from the experience and lessons along the process of financial deepening in other developing countries, the paper is of practical significance to actively resolve the present problem of the efficiency loss of the marker in the process of financial deepening; to build up a high-quality financial market; to push and direct the further development of the financial deepening and to avoid the financial risks taking place in the process of financial deepening.Based on the existing research outcome and the fundamental theories in economics and finance, the paper is divided into five chapters: Chapter one explains and analyses the theory of the financial deepening and its practice in China, proposes the researching background: The financial industry in China has achieved drastic development, its structure has changed remarkably, the financial deepening improves constantly in quantity, while existing salient problem in quality and structure.The research method taken: it seeks to combine the practical induction with the theoretical description, the vertical historical summary with transversal comparison, empirical research method with normative method, qualitative analysis with quantitative analysis.Chapter two reviews the traditional theories on the financial deepening, from its formation (Golden Smith's financial structure theory) through the development of the financial deepening theory (Shaw and Mackinon's financial deepening and financial liberation theory) to the financial strain theories of Stiglez et al. It ends with the summary of the relationship between the financial deepening and financial development.Chapter three focuses attention on analyzing the process of the finance deepening and the underlying reason of the Chinese suppressive financial policy. It conducts the discussion from the angle of financial structure, financial growth, and the financial suppression in the financial mechanism. The chapter with the economics theories,explains the general situation of the financial deepening, and the reason of policies that causes the financial suppression.Chapter four mainly analyzes the investment direct and indirect and the degree of the contribution of the interest rates to the economic growth, from the correlation between the index and economical growth in the financial deepening. Afterwards, it empirically testifies the conclusion mentioned in the chapter three, and provides a basis for the next chapter of policy recommendation.The chapter five, on the basis of the preceding empirical analysis, carries out several recommendations on the Chinese financial reform.