The Study On The Effects Of Financial Development On Net Sophistication Of Export

This article studies the effects of financial development on net sophistication of export from two perspectives of foreign direct investment's (FDI) spillovers and technology's R&D efficiency. Firstly, we review the previous studies on the financial development and (net) sophistication of export, and sort out the relationship between them. Then we analyze the path of effects by using economic theory. On the one hand, we find that the high level of financial development can improve the scale and efficiency of enterprises'financing, and can enhance the association between local and foreign companies, especially in the industrial value chain, and then could improve local enterprises' capacity of absorption, and further promote foreign direct investment (FDI), meanwhile, the sophistication of products get improved, and ultimately enhance the net sophistication of export. On the other hand, we find that the high level of financial development can improve the efficiency of enterprises' financing, and can reduce the costs of enterprises' financing, and the efficiency of R&D get improved by combining with human capital and foreign direct investment's (FDI) spillover, enriching the kinds of products, enhancing the heterogeneity of products, and then improving the net sophistication of export.In the empirical part, we make the empirical test of manufacturing industries of China from three perspectives by adopting the index of the net sophistication of export, the external financial dependence, the financial development, and other relative indexes of China from 2001 to 2011 in terms of OECD standards. The three perspectives are based on products, technology, and the external financial dependence. We find that the financial development could promote the improvement of the net sophistication of export, but the positive effect of financial development on the net sophistication of export in the high-technology industry and medium-high-technology industry performs weaker, which reflects China is currently in the transition stage towards the high-end industry. In addition, the positive effect of financial development to the net sophistication of export in the higher external financial dependence industry is significant. Foreign Direct Investment (FDI) and human capital (HC) have the significant positive effects on the net sophistication of export to a certain degree, which is consistent with the theoretical analysis. This shows that the foreign direct investment (FDI) technology's spillovers and the increase in the ratio of engineering and technical persons to the employees could promote the improvement of the net sophistication of export. In most cases, R&D has the negative impact on the net sophistication of export expenditure, which is contrary to the theoretical analysis. This reflects that the development of China's financial market is lagging behind, which makes the positive effect of R&D investment that is lack of diversity on the net sophistication of export dose not perform well.Finally, with the reference to the international experience of United States and South Korea and the conclusions we get, we put forward the recommendations for China, including expanding the scale of commercial banks appropriately, improving the financial efficiency.