The Influence Of China’s Financial Development On Environmental Quality

With the rapid growth of China’s total economy,the rapid consumption of natural resources and the deterioration of the ecological environment have become a problem that’s increasingly prominent,which has restricted the sustainable development of the economy.It has become a common focus of all countries to improve the environmental quality and achieve harmony between mankind and nature with the assurance of reasonable economic growth.Finance,as one of the important economic means,is playing a significant role in protecting the environment.Domestic researchers have now realized the influence that financial development has on the quality of environment.However,studies are mainly focused on qualitative analysis of protecting the environment with financial means.Quantitative research on the topic and its mechanism has thus become theoretically and practically significant to the harmonious development of China’s economy and environment.Base on a thorough review of the existing literature,this thesis has done a detailed research on the mechanism of financial development affecting environmental quality through scale effect,structural effect,and technological effect.In simple terms,financial development affects economic growth,industrial structure,and technological advances,which can significantly influence environmental quality.An analysis on the current situation of financial development affecting environmental quality is conducted in the following part.A comparison is made to analyze the financial development of each province in China,using financial interrelation ratio and financial efficiency as the measuring indicators.Then,the environmental quality of each province is analyzed using a comprehensive index measured with the entropy-weighted method.With the help of the extended EKC model and the least square method,this thesis uses the comprehensive index,financial interrelation ratio,financial efficiency,and other concerning variables and draws the conclusion that financial development does have a positive effect on environmental quality.The following examination on the influencing mechanism shows that,China’s financial development has a negative influence on its environmental quality through scale effect and a positive influence through structural effect;environmental quality can be improved through technological advances.On the basis of the above analyses,this thesis proposes several policy suggestions from three different perspectives:macroscopically,enhance the financial facilitation to the Green Economy with the development of PPP-model green industry fund and the leverage effect of fiscal instruments on green finance;at the meso level,strengthen the guidance function of financial development on industrial structure through the optimization of the financial structure and the guiding effect of the policy-oriented;microscopically,improve the support of financial development on enterprises’ technological innovation,through funding support in clean technology and education industry.