A Study On Financial Service Industry Development

This paper tries to explore the essence of financial service industry development from the scope of structure-efficiency-stability. The development of financial service industry is an ongoing changing process from scratch, from less to more, from simple to complex, from elementary to advanced. In essence, the development of financial service industry means optimization of structure, efficiency improvement and financial stability.After the formation of financial structure, with the development of economic development and scientific advancement, the reducing of transaction cost is the fundamental intrinsic motivation of financial structure evolution; system is the fundamental key extrinsic factor. Exterior system arrangement influences the financial structure through intrinsic factor-transaction cost. A series of system arrangement can overcome the information asymmetry, decrease the uncertainty of financial transaction, reduce financial risks, and accordingly boost financial structure optimization. The optimization standard of financial structure includes facilitating the economic growth and preventing the financial risks. Financial structure system should be able to increase the efficiency of transforming the savings into investment and realize the efficient allocation of capital; to be helpful to the financial stability and preventing the financial risks. Instead of shouldering all the risks by the government, it is necessary to transfer and spread the risks reasonably, e.g. at investors' own risks, and instead of concentrating all the risks into the banking system, it is necessary to disperse the risks into different financial institutions. The optimization of financial structure can improve rate of bank saving transforming into investment, capital allocation efficiency, and rate of saving and boost economic development.Efficiency is the core of finance. The financial efficiency is the efficiency of capital financing, which means financial institutions generate maximum output with minimum input. From the micro perspective, the output of financial system is the amount of sales revenue and the profit of financial system itself. The micro financial efficiency refers to the ratio of input-output, actually the financial institution efficiency. From the perspective of macro level, the output of financial system is the amount of social savings, which mobilized by the financial system, the amount of saving transformed into the investment which helped to drive the economic growth. Similarly to financial efficiency, to some degree, the financial service industry competitiveness index synthetically reflects a nation or a region's financial capital allocation capability and comparative advantage. So, the competitiveness index is further used to reflect the conglomeration and radiation capability of financial resources. While concerning the financial efficiency, we shall also pay attention to the financial stability.Since financial transaction has the features of overlapping, subsequent and anticipative, while information asymmetry will lead to adverse selecting and moral risk, which will increase the financial risks. Although financial risk is inevitable, but reasonable arrangement can reduce the risks and disperse the systematic risk or transfer the risk to risk taker, finally maintaining the financial stability. There are triple meanings in the financial stability. The first is the functional stability, i.e., the financial system serves well to the real economy. The second is the financial system stability, which refers to the strong ability of preventing, handling and managing the risks. The third is the combination of above two. It is unwise to overlook the construction of financial system itself by emphasizing the serving function of finance to the economy; it is incorrect to lay undue stress on the independent and virtual feature of financial system while neglecting the supporting role of finance to the economy. A stable financial eco-environment is the guarantee to improve the financial efficiency. Financial stability can make it possible to analyze and predict the cost and revenue of micro entities, the transaction parties can precisely evaluate the transaction risks ad profits, all the above is necessary for the financial efficiency. On the other hand, financial stability differs from the financial efficiency. Financial stability can be based on the high efficiency, or can be at the cost of sacrificing the efficiency, i.e., there are differences of high efficient and low efficient financial stability status. Experiences show that, at the circumstance of low financial efficiency, the obtained financial stability is temporary and unstable. The constant real stability of national and regional currency and financial stability must be established on the basis of improving the financial efficiency.The paper thinks that, the financial service industry is influenced by the factors such as geography location, the regional culture and corporation between the bank and enterprise. The geography factor is an important explanatory variable in explaining the regional economy, regional financial service industry development difference. Regional culture is total of the regional sense of Masses, value concept, code of practice and management rules, which plays a very important role in regional economic and financial service industry development. The core of culture is the value opinion, which provides a judgment standard and steering the people's action towards a certain direction. Generally, once a cultural value of concept is formed, which is proved to be of science and advanced, it will be widely accepted by the mass. Most people accept fixed thinking habit. When individuals facing complex, information overloaded economic field, unable to make rational judgments, will recur to past tradition to reduce the cost of selecting and simplify calculating process. The designated regional economic and financial development backed up by the cultural background, each region has its unique cultural value concept. Co-existing cooperation between bank and enterprise is the most important factor influencing the financial service industry development. Enterprises and banks are actually the connection points of social networks, but the distance of connection points are not exactly equal, some enterprises and banking institutions with "closer" distance have, through long term transactions, produced reputation mechanism and mutual beneficial co-existing cooperation between bank and enterprise, which promote the development of regional financial service industry. The paper based on the concept of co-existing cooperation between bank and enterprise, applied the information economic analysis format and three modules to analyze the credit game between bank and enterprise. In conclusion, we should perfect the mortgage system, establish high-efficient judiciary to reduce transaction cost and promote win-win between bank and enterprise also should perfect the social credit system and extend the fame mechanism to boost the development of financial service industry.From the aspect of outer aggregation form, the paper analyzed the regional characteristics of the development of financial service industry. The inevitable result of regional economic activity aggregation is the unbalanced development of regional financial industry, which leads to the formation of regional finance. Regional finance means that under the market economy, the capitals are aggregated towards the high efficient areas or departments. The regional financial development has clear hierarchy. Taking the Delta Region of Yangtze River as an example, as the national or the international financial center, the financial competitiveness of Shanghai is strongest, undoubtedly in the tier one. Nanjin, Hangzhou, Suzhou and Ningbo are regarded as the subsidiary financial center of Delta Region of Yangtze River, with relatively strong financial competitiveness, taking tier two positions. The tier three cities are Wuxi, Changzhou, Zhenjiang, Nantong, Yangzhou, Taizhou, Huzhou, Shaoxin, Jiaxin and Zhoushan. So it can be thought that the financial aggregation center is a multielement hierarchy structure, a pyramid structure composed by elements of multi-level in series, parallel in same level and different hierarchy. The comparative analysis of 15 cities can help the decision makers to realize the relative status and difference of each city and its own development route on the financial service industry.Taking Ningb as an example, the paper implemented demonstration analysis on the financial service development and put forward policy recommendation based on the analysis. The computation of two indexes shows that, (the indexes of Financial Interrelations Ratio (FIR) and reciprocal of variation coefficient of the source of fixed capital investment), the financial deepening of Ningbo generally moves upward. The main reason of Ningbo's financial deepening is the monetization, the fast economic growth is also the important factor, the non-market factor also influence the financial assets expansion; the financial width in Ningbo also rise, but the indirect financing is in imbalanced position comparing with the direct financing, and structure of financial instruments is unreasonable, the regional financial structure remains to be optimized. From the perspective of financial function, the financial system's clearing and settlement function and the resource allocation function exerts relatively well in Ningbo. The extended functions, such as risk management and information provision, need to be developed further. Among the 15 cities in the Delta Region of Yangtze River, Ningbo's financial competitiveness is in the second tier. It is closely related to the economic environment, humane environment and corporation between bank and enterprise. It matches with the Ningbo's positioning—the economic center of southern Delta Region of Yangtze River. Through the establishment of evaluation model of financial stability, a computational analysis of regional financial stability from 1980 to 2006 in Ningbo shows that Ningbo's financial stability is generally sound which prove the dialectical relationship of financial stability and financial efficiency. The financial service industry has made great progress: financial industry operation steadily grows, financial scale increases rapidly, assets quality and financial ecology are sound, and profitability of financial institutions is better than before. But on the other hand, there still exist some deficiencies such as: unbalanced structure in financial service industry, service ability and innovation need to be further developed, and the financial eco-environment can be perfected, etcs. So it is necessary to adopt measures to promote further growth of Ningbo's finance: measures as strengthening the localized research of financial products, enhancing the innovation ability, expanding investment and financing channels, improving the financial service ability, establishing long-term stabilized system, creating sound financial eco-environment, steering the nongovernmental financial development in order and facilitating constant optimization of financial structure.