Study On The Economic Effect Of Rural Financial Development In The West Of China

Since the end of the last century, government pays more attention to the issues concerning agriculture, countryside and farmers. The development of various undertakings in rural areas has enter a new stage. As an underdeveloped regions, the development of western rural economy is very significant for promoting "new socialist countryside construction". Western region of rural economic development requires a large amount of capital investment, reasonable distribution of the elements, Which is heavily based on the continual financial development. Firstly this paper introduces theory that used in the latter analysing, including the theory of financial development, the theory of economic growth, rural financial theory. Secondly paper phased reviews Chinese western rural financial development process, and analysed the present situation of the financial services in western rural areas from aspects of supply and demand. As to demand,from the vision of demand subject, it includes financial demand of farmers, financial demand of township enterprises and government financial demand. As to the supply side, it mainly introduced the functions of various financial institutions in rural areas and their share of total rural financial. Based on summarizing the western rural finance, Using the theoretical method, the paper analysis the economic effect and transmission mechanism of western rural financial development from the aspect of positive and negative. Then the following part is the empirical analysis, in order to evaluate the economic effect of rural financial development, this paper carries on the analysis to the Western eleven provinces, autonomous regions, municipalities directly under the central government with the using of panel data model and fixed effect model. According to the analysing, it reveals that there is negative correlation between financial development and economic development and the rural financial suppression phenomenon is obvious. For a long term, the western rural finance promotes economic development in a certain extent, but the effect is not obvious. It shows that the western financial system is not perfect and inefficient. In addition, this paper also studied in detail the relationship between variables such as rural investment, rural human capital, rural industry structure of agriculture and economic development. According to the result of analysis, there exists some issue in promoting economic development by western rural finance system. Put forward policy suggestion including improve the system of financial institutions in rural areas of West China, improving the rural financial system and optimizing the external environment of the development.