Regional Differences In The Relationship Between Financial Development And Economic Growth In China

The year of 2014 is the start of all the years of deepening reform, Chinese economy changes from rapid growth to medium speed growth, and goes into the new normal sustainable of stable development. A country’s or region’s financial system is becoming more and more perfect, which is one of the essential factors to sustainable and stable development of the economy. The connection between development of finance and growth of economy is always the key research field in the academic circles. Joseph Schumpeter(1912) put early study on the connection between development of finance and growth of economy. Then, the theory of financial development gradually matures, with Goldsmith, Shaw, Gurley, Mckinnon and other economists as the representative of this theory. The causal connection between development of finance and growth of economy become a hot academic research field. What was going on between the two? The academic circles continuously emerge theory and empirical research for the connection between development of finance and growth of economy. The ultimate aim is to seek a reasonable and effective financial development system, to promote economic sustainable and steady growth. Foreign literature is mainly the establishment and improvement of the theoretical model. Domestic literature is mostly carried out empirical test by improving the measurement model and index, or is the revision of the foreign theory model.The paper believes that the value of study on the financial and economic is serving for developing regional financial policy, so that to guide the growth of regional economy. Chinese "two yuan economic" a very striking feature, the development gap between eastern and western is large. One of the main reasons is that financial development is at different levels between easten and western. From the present situation of the research, domestic on regional financial development and regional economic growth discussion remains to be deepened, especially the regional differences. So, in condition of Chinese regional economic development gap widening, it is great practical significance to have a study on making financial development policy with regional characteristics so as to adapt to the regional economic growth.Based on the above analysis, by studying the regional differences of connection between development of finance and growth of economy in the east and west of China, put forward strong policy recommendations for promoting regional economic growth and coordinated development of regional economy by the financial system. Provide an important reference for further deepen the reform of the financial system in China. By using provincial data in 1978-2012, demonstrate the connection between development of finance and growth of economy in the east and west of China. In order to verificating long term and short term causal connection between development of finance and growth of economy, use the following three types of research methods: panel data unit root test, cointegration test and panel data error correction model. Studies have shown that, there are big differences in the connection between development of finance and growth of economy in the east and west of China. There is bidirectional long-term and short-term causal connection between development of finance and growth of economy in the east of China. However, there is only unidirectional long-term causal relationship from development of finance to growth of economy in the west of China, and the influence in short term from financial development to economic growth is not obvious. In order to make finance play a greater role in promoting the economic development, put forward the policy suggestions as follows. Implement regional financial development strategy, construct the western financial and economic benign interaction mechanism, and establish financial and economic coordination development mechanism between eastern and western.