The Empirical Analysis Of China's Financial Tilt

As far as the historical development of every country's financial industry was concerned, the indirect finance usually developed before the direct finance, and the proportion of indirect financial businesses was also more than that of direct financial businesses in a long time, which formed the"financial tilt". Since 1980's, with the emergence of financial liberalization wave, the financial securitization has been strengthened. In many countries, the market share of direct finance has gradually matched or exceeded the indirect finance, so the financial tilt pattern begin to reverse. With the reversal wave, scholars have paid more and more concerns to the comparative advantages of two financing modes in the allocation of financial resources. Most studies agree that the stock market-led direct finance owns comparative advantages in the risk diversification and financial innovation, while the bank-led indirect finance is more efficient in information access and financial supervision.The outbreak of the Asian financial crisis tells us that the close ties of government, banks and enterprises easily caused the "crony capitalism". In the government's implicit guarantee, banks and enterprises had a great deal of opportunism space, so the enterprise's viability was very weak, and the drop in exports and dependence on foreign capital were inevitable. Consequently, market-oriented countries, such as United States and Britain, attracted a large number of hedge funds for the market's "vitality", and its securities derivatives business also grew rapidly. To the end of 2007, t??otal market value of the global financial derivative products had been more than 680 trillion U.S. dollars, which was more than 10 times of the world's GDP, and those products provided 75 percent of global liquidity. With the securitization, the virtualization degree of global financial products continues to accelerate, and the transmission mechanism of financial risks has also changed. To the sub-loan crisis in the United States as an example, its original risks existed in credit institutions, but risks were transferred to the direct financing market through securitization, then the exchange of CDO and CDS returned the derivative risks which had been enlarged several times to the clearing bank. Thus, a "credit crunch" through the accumulation of financial derivatives has become a chain of unprecedented financial turmoil which caused severe concussion in the real economy by the financial accelerated mechanism. China is a typical bank-based country with the low level of asset securitization, compared with the market-oriented countries, Have China's financial separate operation and "bank-led" financing structure buffered the international financial crisis? Second thought, even without external shocks, can China's financial tilt support its sustainable economic growth? And what is its own risk derivative mechanism? Further, what kinds of policies and measures should be taken to optimize China's financing structure and improve the allocated efficiency of its financial resources? Above-mentioned issues need to be considered and answered seriously.Under the endogenous growth framework, with the ordinary least squares (OLS) and the vector autoregressive (VAR) model, the thesis has tested the growth effect of China's financial tilt. The results show that the growth effect of China's financial tilt has its specific restrictive conditions: first, the implicit guarantee to state-owned bank system can transform the dominant credit risk into recessive ones; second, capital-control system based on a fixed exchange rate can reduce the real interest rates and exchange rates of RMB, which can not only pass the operating costs of bank to the borrowers, but also digest surplus production capacity through export; third, China's high investment can bring high growth during its economic transition period. In short, China's financial tilt is adapted to the labor and capita??tensive output pattern. But with the improvement of market level and factor endowments, the marginal output of China's financial tilt trends to decline.Under the financial economy cycle theory framework, with H-P filter, ARCH models and panel data fixed effects model, this thesis has tested the volatility effect of China's financial tilt. The results show that the Chinese credit cycle are highly relevant to the economic cycle, but the impact's fluctuation effect during the credit crunch is greater than the impact during the credit expansion period, which verifies the existence of non-symmetric financial accelerator effect. The volatility effect of China's financial tilt rooted in the assessment incentives of local governments and the limited liabilities of enterprise owners. With the"assessment incentives"and"limited liabilities", as long as the accounting cycle of the investment is long enough, business managers can always divide up the "dividends" with local governments by expanding the early accounted assets, with the state-owned banking system bundled as a "hostage", which involved macro-control into the plight of "clean-up - assistance - cleaning up - assistance ......". Every clean-up always deteriorated the financing environment of the non-state-owned enterprises, so the game solutions between the central government and local governments (enterprises) is to lower real interest rates by the control of inflation and nominal interest rates, which will alleviate the pressure on borrowers.Financial tilt with its reversal is an objective and historical evolution. Generally, the financing structure is matched to the real economy, so the abuse of financial resources (the same to financial repression) often leads to drastic fluctuations in the economy. In China's economic restructuring process, the key to reduce the volatility effect of China's financial tilt and implement financial sustainable development is to gradually reduce the state-owned financial property boundary to restrict "predatory-type owner" opportunistic behavior; the second measure is the improvement of the securities market system for Chinese enterprises'equity and debt financing, which will improve their governance structure and viability; the third measure is the creation of effective local financial arrangements to weaken the rigid dependence of local governments and state-owned enterprises on bank funds, which will optimize the allocation of regional finance resources; the last measure is the reinforcement of supervision of financial institutions, the functional regulation and international coop??ion, which will bring the effective monitoring mechanisms.