Financial Development And Industrial Structure Upgrading

After the rapid development in 2000s, China has become the second largest economy in the world. Nevertheless, it cannot be ignored that the economy has suffered from many problems including less-developed industrial structure, extensive operation and management, possible future depression and so on. Therefore, it is urgent to promote the transformation and upgrading of the industrial structure. As the core of the market economy, the financial system is a significant mean and tool to achieve industrial structure optimization. During this process, it will be of great importance to adjust the future development of financial system and make better use of it.Based on the existing theory and research, this article conducts the study in three aspects. Firstly, this paper divides the financial system into two different parts. One part is indirect financing like banks and the other one is direct financing like stock market. Then, the theoretic mechanism and the influence of these two parts are separately discussed. Secondly, there is a review of the development of China's financial system and industrial structure, leading to a discussion of the existing problems. Thirdly, this article uses the time series analysis to study the relationship between the growing of the banks and stock market and the level of industrial structure which was collected by utilizing principal component analysis.Thus, this article draws the following conclusions. The development of financial system indeed promotes industrial structure upgrading, but it is not when it comes to industrial structure upgrading to the financial development. What's more, the banks play a key role in the process, while the stock market has a complex influence. Finally, the article presents several policy recommendations, including improving the efficiency of banking management, establishing multiple-level capital markets and enhancing the role of policy finance.