| Financial deepening theory is the foreside of financial and economy study. Since 1970's,financial deepening theory has developed significantly both in practice and in theory. And it became the mainstream and focus of financial research. From late 1980's to mid of 1990's,along with spread and the development of inside increase theory,financial deepening theory has developed in two aspects:first it is breakdown the analysis McKinnon and Shaw's frame work and incorporate inside increase theory and financial medium theory into the frame. They start with effectiveness function and taking into account factors such as uncertainty,asymmetrical information,supervisor cost,quality grade and externalities. And have established various models based on microeconomic foundation. They have made the explanation in logical manner how financial deepening acts with economic increase. And have suggested some policies on financial development;2nd is that the focus of research have expanded form the developing countries to all. And not only want to tackle the problem of financial development in developing country but to solve some problem of financial deepening in developed countries,such as how to deepening financial system and promoting economic development.The implementation of financial deepening theory in developing country has not been smooth from the beginning. There are South American country's debt crisis and the crisis of American credit union in 1980's,the financial crisis of Mexico in 1990's and that of Southeast Asia in 1997. Are all closely related to financial deepening theory,as a result even people began to doubt the soundness of financial deepening. Some countries of South America and Southeast Asia after the financial crisis resumed the strict control financial. At the meanwhile,traditional financial deepening theory measures the financial depth based on FIR and M2/GDP,accord to this approach,the financial depth of China has reached a fairly high level,even exceeding the developed countries such as the USA and EU. The queries of the Deepening direction what financial theory draws up and the controversy on measurement of financial depth are two deep ditch of the financial deepening theory.The study of the financial reform in our country and that of financial deepening theory are seemingly two parallel lines are hardly related to each other. According to gradually reform ideology theory,financial reform should base on current management framework and social economic condition what have already become facts. And the research in financial deepening of China focus on introducing the Western theory.After all,whether financial deepening theory is applicable in China. The utilizing of this theory in China is the level and the sequential step only? Is there any special mechanism in financial system of our country? These are the problems deserve further study.The biggest contribution of McKinnon and Shaw's study is that establishment of a framework on analyzing the relationship between financial deepening and economic growth. This paper mains to discussing the emphases,channel and steps of financial deepening of China,based on the discussing of the unique characteristic of the financial mechanism hindering the financial development.Before further discuss,this paper makes two preparations:one is analysis of the genuine reason that caused Southeast Asia financial crisis;second in hope ofsolved the measurement of" financial depth ",have introduce new measurement index. Because both the reason of the financial crisis of Southeast Asia and the contradiction about measurement of M2/GDP,its essence is the understanding of" financial deepening " and the problem of measurement. Do not solve the mistake concept " finance is deepened ",what is repression what is deepening to have no way of mention;Do not solve the measurement of financial depth,financial is trend to deepening or towards repression is hard to say.Chapter 2 is a review of the financial repression and financial deepening theory. Have discussing fin...
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