Finance Development,Finance Dependence And Export Growth

In the evaluation of the world economic globalization,both finance and international trade are always concerned by economists and scholars, whichever is to promote the economy growth of a country or a region. During this process, the relations of these two major subjects have gradually becoming a hot topic in academia.In the past three decades of China’s reform and opening-up, the trade scale and the level of financial development have risen rapidly. To clarify the mechanism and effect of financial development on foreign trade is an essential part for deepening financial reform, upgrading trade structure and transforming the pattern of economic development. Therefore, many economists have fully discussed the channels and mechanism of China’s financial development on foreign trade, but the conclusions of their studies are not consistent. The purpose of this thesis is to find out how the financial development acts on foreign trade, and then illustrateand explain the mechanism theoretically and emperially. This analysis is based on the angel of external finance channel, from which financial system correlates with production and operating activities. And then, the paper provides a new interpretation for the trade development of different regions and the regional trade differentiation and discusses the approaches to improve the development of China’s foreign trade by finance.This paper, which study is based on existing literatures is consisted of 6 chapters, and contains the theoretical and empirical study of the effects of financial development on foreign trade via external finance. Chapter 1 is an introduction of this paper, Chapter 2 reviews the related theoretical and empirical literatures of financial development, international trade and external finance theories. Chapter 3 carries out a multi-angle analysis of mechanism and channels of financial development on foreign. Also, it primarily constructs a theoretical structure of financial development making influence on foreign trade via external finance and shows that rising the level of financial development is significant working for optimizing fund allocation and improving financing constraints. With the panel data of 29 provinces of China from 2001-2012, Chapter 4 empirically analyzes the effects of financing development acting on regional export growth and further improves the positive effectiveness of financial development. Chapter 5 identifies the external finance features by financing source, and makes an empirical analysis on the interactive relations of different financing sources and then explains the reasons of regional trade differentiation. Chapter 6 summarizes the mechanism of financing development acting on foreign trade via external finance, and then makes suggestions on deepening financial reform.At the basis of previous studies, this paper mainly makes conclusions as following aspects:(1) Model-based theoretical analysis shows that any improvement and optimizing in financial system would improve the amount of external finance in the economy and reduce costs of external finance. It can eliminate the obstacles of external finance constrains, and help obtaining trade advantages and economy scale to especially those highly depending on external finance. One country with a higher level of financial development, with ceteris paribus, will have more comparative advantages in those external finance sectors. The higher dependence of the sector, the more obvious of advantages, and even the economy scale and trade profits.(2) Empirical analysis of finance development on foreign trade shows that external finance itself is not a motivator to increase export growth, but can make a positive effect on foreign trade combining with financial development. Similar results are obtained from regional data study. The comparison result further reveals that the effects of financial development on foreign trade are asymmetry. With the improvement of financial function and optimizing of financial structure, a region with higher dependence of external finance would gain more profits than a region which dependence of external finance is lower. Furthermore, the study also finds there is a "threshold", which shows that the financial development has to step over the level of "threshold" to relieve financing constraints and then explore export.(3) Empirical analysis of interactive mechanism between different financing channels shows that, classifying financing channels, by financing features, is contribute to give a further analysis of finance development acting on export through external finance. The rising of external finance dependence will expand region export while the bank credit increasing will lead to a slowdown in region export. And the differentiation is more apparent for those which are highly dependent on external finance. There is a significant effect on export, but the financing sources differentiate due to the different finance development. Comparing with bank credit, FDI plays a greater role in those regions with higher level of finance development, and even to assist in meeting the shortfall in bank credit. While in the regions, which the level of finance development is lower, bank credit is facilitated more than FDI.