Comprehensive Evaluation Of China’s Financial Stability Based On The Link Between Financial Development And Economic Growth

When improving financial repression phenomena, financial liberalization reform led to more and more financial crisis than before, which has given rise to the world attention to the issue of financial stability. With the speeding up of international financial integration and the deepening of the reform and opening up process, the importance of financial stability in China’s financial reform process is increasingly prominent. In general, financial stability means that the operation of financial institutions and financial markets is normal, financial crisis could be avoided, or the financial system being able to effectively resist finiancial crisis. In fact, financial stability depends on that the link between financial development and economic growth being normal. Based on the understanding of the meaning of financial stability, combining with the practice of China’s financial reform, this article measures China’s financial stability situation comprehensively from the perspective of investigating link between financial development and economic growth. The link between financial development and economic growth is reflected in microlevel, macrolevel, and the level of system. This paper evaluates China’s financial stability from 1999 to 2012 accordingly from three aspects:cycle fluctuation characteristics, the financial faction and coordinated development theory.Starting from the understanding of the concept of financial stability and several classical theories, this paper establishes the overall research perspectives and research direction, namely, evaluating China’s financial stability by investigating the relevance between financial development and economic growth. Then, this artical fully introduces evolution of China’s financial system since the beging of reform and opening up progress, which indicates that China’s financial system develops with the improving of economic situation, at the same time triggers the financial supervision reform and unprecedented attention to the issue of financial stability. The construction and calculation of financial development and economic growth index lays a solid foundation for the empirical part of the full text. Based on this, the empirical research involves three level of correlation between financial development and economic growth, namely, microlevel macrolevel and the level of system. Specifically, this paper first deconstructs Minsky’s financial instability hypothesis, so as to evaluate whether it has become true in China and measures the state of financial stability. Secondly, using virtual variable model and state space model, this paper examines the validity of financial function, which measures the state of financial stability again. Finally, using coordinated development model, this paper discusses the moderation of financial development and evaluates the state of financial stability based on the theory of coordination development. On the basis of theoretical and empirical research, the article finally put forward several corresponding suggestions to maintain China’s financial stability.Research shows that:first, the level of financial development and economic growth change with different stages, of which 2007 can be regarded as the watershed of financial development in China since 1999. Second, China’s finance risk level fluctuates frequently since 1999, does not present the accumulation trend stated in financial instability hypothesis. With the slowdown of economic growth and the speeding up of financial system reform, the financial risk in China tends to be increased. Third, the financial development of our country presents significant positive promoting effect on economic growth, and the positive effect improves from the end of 2006. And during the period of samples, the influence degree declines twice obviously. Fourth, the comprehensive development degree of the two systems of financial development and economic growth increases steadily since 1999, while the coordination degree decreases, thus limiting the realization of "high coordination development" coupling model.Overallly, the overall state of financial stability since 1999 is good, which largely results from Chinese government’s macrocontrol policy and deepening of financial reform. With the accelerating of financial liberalization and internationalization, the slowdown of China’s economic growth, the ascension of the difficulty ofgovernment regulation and increasingly emerging of informal finance, the financial stability of our country will face greater challenges in the future. Therefore, in order to improve China’s financial stability, we have to improve financial stability assessment framework, and maintain the stationarity of regulation policy in the background of international factors that affects China’s financial stability increasing day by day. At the same time, the financial risk management mechanism should be deepened and the new development of informal finance should be paid close attention, so as to defuse financial risks in time. Finally, under the background of unbalanced regional economic development, we have to promote the moderate development of finance and the coordination between financial development and economic growth.