An Empirical Study On The Relationship Between Financial Development, Foreign Direct Investment And Industrial Structure In China

The report in the Eighteenth National Congress of the Communist Party of China clearly pointed out that in order to promote strategic adjustment of economic structure, we must focus on optimizing the industrial structure, promote the healthy development of both strategic emerging industries and advanced manufacturing industry, speed up the transformation and upgrading of traditional industries, and promote the service industry especially the modern service industry development. During 30 years of reform and ope ning up, the industrial structure in our country turned centralized development in industrial and agricultural industries into the coordinated development of primary industry, like secondary industry and tertiary industry. And then the structure of modern industrial structure system has been preliminarily established. However, in the long run, the modern service industry in C hina is underdeveloped. The proportion of the third industry in the three industry is still at a low level. It is the main performance lacking competitiveness in the world that the coordination among three industries is worse, at low technique level and products keep low value-added in China. Therefore, in the complicated international economic environment, the growth of domestic economic tailed off. So it is the major strategic direction, which transforms the mode of economic growth in C hina and realizes the economic sustainable development, to speed up the upgrad ing in adjustment of industrial structure.First, this paper introduces and discusses the main research background and research meaning. The article reviews the study of financial development, foreign direct investment and industrial structure by domestic and foreign scholars. On the basis of existing research, I can sort through the overall framework and the main research thought. Second, it is the breakthrough point to analyze the development of China’s financial industry and foreign direct investment, the adjusting status quo and characteristics of industrial structure. Third, the related theory about the financial development and the influence of the adjustment upgrading of industrial structure made by the foreign direct investment is summarized to describe the impact from the internal linkage mechanism between financial development and foreign direct investment to the adjustment of industrial structure. Forth, I establish the VAR model and fixed effect model using the time series data and panel data respectively, in order to research C hina’s financial development and the relationship between foreign direct investment and industrial structure’s adjustment. Thus it can be verified the part of theory. The empirical results show that it keeps long-term stable relationship among China’s financial development, foreign direc t investment and the promoting effect from FDI to the upgrading of industrial structure. Financial efficiency can improve the extent of technology spillovers of foreign direct investment to promote the adjustment of industrial structure, but its influence is lag. The good internal linkage mechanism cannot be formed between the financial development and the influence made from foreign direct investment to industrial structure. Fifth, on the basis of theoretical analysis and empirical results in this paper, I can recommend the corresponding policy. Firstly, accelerate the pace of China’s financial system’s reform, strengthen the driving force of financial innovation, improve the financial services’ ability of the real economy. Second ly, gradually soften foreign investment access’ terms, guide and encourage alien merchants to invest in cross industry, in modern agriculture, in high and new technology, like advanced manufacturing, energy conservation, environmental protection, new energy, in modern service industry and in other fields. Third ly, stimulate domestic consumption to drive the upgrading of industrial structure. Fourthly, increase investment in education, in cultivating high-quality skilled personnel, in meeting the needs of the seco nd and third industry talents. Fifthly, increase investment in research and development costs, encourage independent innovation, and promote the rapid ly development of hi- tech industry based on research and development.