A Research On Financial Agglomeration's Effects On Regional Economic Growth Mechanism

Since 1970s, financial enterprises started to incline to centralize in a certain city or area, and financial industry agglomeration has been quite common in modern economic society. However, many cities in China play the role of black hole of finance industry because they do not radiate but only absorb. This will block the accomplishment of real financial agglomeration, cause widen gaps of financial and economic developments among regions and harm "harmonious finance". We need to learn from development experience of international metropolitans, research and promote financial radiation of central cities, and realize common development of different areas as well as the whole country.Most existed researches on financial agglomeration are based on theories of industrial agglomeration and enterprise cluster, focusing on financial liquidity as well as motivations and effects of financial center establishment. However, they usually ignore that finance and financial industry are a kind of special resource as well as the specialty of financial industry agglomeration, and therefore they cannot explain the special function of finance in economic development. Financial functional paradigm and financial resource theory of financial development theory can inspire us to scientifically identity financial agglomeration and its relation with regional economic development. Meanwhile, ideas and principles of financial geography can provide new perspectives and methodology for our research on financial problems.According to financial resource theory, financial resource can be transferred and proliferated in various ways on different levels, including the regional movement. This makes it possible to develop and deploy financial resource in a wider area. Financial agglomeration means the dynamic process that dynamic changes of cooperation, deployment and combination between financial resource as well as local conditions promote the development of financial industry which leads to the emergence of financial regional denseness system in a certain area and space. The process of financial agglomeration is mainly determined by Pareto improvement mechanism of financial efficiency, which is mainly observed as concentration and diffusion of financial resource. The two processes are both opposite and consistent with each other. The definition of financial agglomeration determines that we can establish measurement indices of financial agglomeration by taking into account the two respects of spatial agglomeration and regional diffusion of financial resource. Factor analysis of finical agglomeration levels in Shanghai, Hangzhou and Nanjing shows that these indices can describe spatial concentration situation of financial resource and its regional diffusion level, which means they can reflect financial agglomeration level in the city.Functions of financial agglomeration on regional economy can be concluded as development effect on central areas and radiation effect on surrounding areas. Firstly, financial agglomeration promotes economic development of central areas and achieves development effect (i.e. the demand relating effect and the capital spillover effect) through its circulative and accumulative causal consequence, and casts negative effect on regional economic development with its market congestion effect that is less influential. Besides, radiation effect of financial agglomeration on surrounding areas includes the following aspects. On one hand, industrial resource concentration casts the welfare compensation effect on surrounding areas; on the other hand, transition from the concentration of financial resource in core areas to its diffusion to surrounding areas stimulates economic development on surrounding areas through encouraging technological advance, enhancing capital accumulation and promoting savings-investment conversion, namely the dispersion effect. Analyses of Shanghai, Nanjing and Hangzhou show that Shanghai enjoys the highest financial agglomeration level among the three, and its financial agglomeration casts an obvious development effect on its economic development but no obvious radiation effect on surrounding areas. Financial agglomeration in two provincial capitals is on relatively low level, which has no obvious effect on economic development in both provincial capitals and their provinces.Function mechanism of effects on regional economic development of financial agglomeration can be concluded into following aspects.Firstly, function mechanism of effects on regional economic development of financial agglomeration from the perspective of financial functional paradigm. Concentration of financial resource in core areas can broaden and deepen financial market, promote sound development of regional financial industry, and influence the development of real economy through its five principal functions (i.e. risk management, information disclosure, company administration, savings accumulation, advantage exchange). Analysis of Shanghai shows that the financial agglomeration speeds up the development of finance industry and promotes economic development of Shanghai City. Although financial agglomeration is also taking place in Nanjing and Hangzhou, the function of finance is not obvious.Secondly, financial agglomeration can accelerate industry adjustment, optimize regional industry structure and promote regional economic development. Financial agglomeration can meet the demand of capital of industrial agglomeration by absorbing capital of high quality. It can eliminate cluster enterprises' opportunism, motivate cluster Enterprises to innovate and promote the emergence and the development of industrial agglomeration. Because industrial agglomeration coexists with industrial transfer, it leads to further agglomeration and industrial transfer, which helps to realize optimization and upgrade of regional industry structure and promote regional economic development. Meanwhile, industrial agglomeration can improve financial ecology, extend economic foundation of finance industry, and enables the realization of industrial agglomeration. Analyses of Space Economics models show dealing cost is a major reason for financial agglomeration, industrial agglomeration and industrial transfer. Further empirical analyses show financial agglomeration of Shanghai promote the industry structure upgrade of Shanghai as well as surrounding areas, and its positive effects on the second industry is even stronger. However, effects of financial agglomeration on industry adjustment in Nanjing and Hangzhou are not obvious.Finally, financial knowledge spill-over led by industrial agglomeration, by strengthening cluster competitiveness and improving regional levels of technology and productivity, is the significant drive for the development of cluster innovation network and cluster economic development. Given certain conditions, financial knowledge can spill over through cooperation between enterprises, talent flowing and various informal networks. Spill-over of financial knowledge can provide sufficient capital and the stable financial environment for regional technological innovation, promote innovation in and out of finance industry, enhance innovation of the whole are and promote regional economic development. However, spill-over of financial knowledge should not be limited to the agglomeration region. It should goes beyond the boundary of regional industry center and further proliferates to surrounding financial growth poles and financial fulcrums, so as to case positive influence on the economic development of the whole region.Effects on regional economic development of financial agglomeration in Shanghai that has the highest level of financial agglomeration among all mainland cities can be the typical case for this research. Gaps of financial agglomeration between Shanghai and London, New York and Hong Kong exist. However, Yangtze River delta became the important receiver region of global industrial transfer since 1990s, which caused concentration of global industrial resources in Shanghai, and its industry adjustment mechanism of financial agglomeration to regional economic growth be caused to take effect. Besides, by dint of financial integration of Yangtze River delta which leads concentration and deployment of financial resources in a broader space, financial function deepening development and spill-over of financial knowledge, Shanghai attempts to promote its regional innovation and economic development. In order to strengthen radiation effect of finance and to realize the national strategy of "Serve the Whole Country", Shanghai should continue to enhance competitiveness of finance industry, accelerate construction of Lujiazui financial center, improve finance service and promote coordinated financial development of the Yangtze River delta.Shortages still exist in this research. Such aspects as design of measuring indices, model analysis of financial knowledge spill-over and case study require further discussion and improvement.