A Study On The Effects Of Trade Openness On Financial Development：Based On Analysis Of China’s Experience

As international trade expands rapidly, international financial integration is also showed in theworld under the trend of economic integration. More and more researchers turn the vision to theinner aspect of financial development and trade openness. However they think financialdevelopment is the core part of economic activity, so their researches are mostly based ondeveloped countries. They advocate “finance priority” strategy. As a developing country，there isa significant gap between China and other developed countries. So does “finance priority” policyreally fit China?This paper is divided into six chapters. The first chapter is introduction which mainlyintroduces the background, innovation points and the structure arrangement of this paper. Thesecond chapter expounds the related theory and the principle of mutual influence between tradeopenness and financial development. In the third chapter, this paper empirically studies thecausality relationship and feedback share between the trade openness and financial developmentthrough Geweke decomposition test with data from1990to2009. In the fourth and fifth chapter, itempirically analyzes of the impact of the trade openness on financial development from provincialand regional angles. Finally, it summarizes the corresponding conclusions and makes somerelevant policy suggestions. The main research conclusions in this paper are as follows:Firstly, this paper empirically studies the causality relationship and feedback share betweenthe trade openness and financial development through Geweke decomposition test. It concludesthat financial development has certain simulative effect on trade openness both from long-term andshort-term. But our country is a “demand following” economic entity that trade openness drivesfinancial development as the dominant. It reflects the main status of trade openness. It is differentfrom the western developed countries which are “supply leading” economic entities that financialdevelopment promotes trade openness. So “finance priority” policy doesn’t fit our country.Secondly, this paper makes panel data regression analysis of twenty-nine provinces in ourcountries about the effects of trade openness on financial development. It concludes that there is astable relationship between trade openness and each financial development index, but the influencedegree and direction are significant different among different provinces. Thirdly, this paper empirically studies the effects of trade openness on financial developmentbased on Chinese East-Mid-West panel data. The results indicate that there exists a stable long-term relationship between trade openness and each financial development index, but the influencedegree is significant different among different regions and different indexes. However， from theperspective of the whole influence coefficient, it believes that trade openness does not adequatelypromote financial development, especially in central and western regions.