The Rapid Economic Growth Under The Low Efficiency Of China’s Financial System: The Theoretical Explanation And Empirical Analysis

Since the reform and opening up in 1978, the Chinese economy has acquired remarkable achievements. The economy has been experiencing a robust growth for more than three decades, and the annual growth rate of economic output has always been above 9 percent. By the end of 2010, the GDP of China is as large as $5.75 trillion, and China has become the second largest economy only after the U.S. which has a GDP of $14.62 trillion. However, the Chinese economy in the period of transform has appeared a stylized fact, which is contradicted to the traditional economic theories and the references of empirical research, that is, the low efficiency of financial system and high economic growth. This is referred to as“paradox”by Chinese and foreign economists, and has received high attention and deep research.Large empirical research by Chinese and foreign economists approved that the rapid economic growth is not based on high efficiency of financial system, but on the expanding of financial quantity by large investment dominated by state-owned enterprises. But the formation of low financial efficiency under the background of high economic growth, and the high economic growth under low financial efficiency has not been discussed deeply. Meanwhile, the references omitted to think about the background of economic transformation in which the relationship of financial system efficiency and economic growth has been evolved, and the significant function of correct financial secondary allocation efficiency to the economic growth of China in the period of transform, so they can not explain the contradictory fact of low financial efficiency and high economic growth.This dissertation carries out the analysis from the prospective of theoretical and empirical research. First, it constructs an economic model with knowledge acceleration and labor to analyze the“paradox”of low financial efficiency and high economic growth in the period of transformation. Second, it makes an empirical research of the impact of low initial allocation efficiency of Chinese financial system in the period of transformation to economic growth by the panel data of 29 provincial economic sectors from 1986 to 2009. And then, the dissertation makes an empirical test of the economic growth effect of financial leakage scale, direction of flow, and the“sunny production used amphibolous resources”by the data and material on“China Financial Yearbook (1979-2010)”,“Sampling Investigation Report of World Bank(2003, 2006)”, and the typical case of“sunny production used amphibolous resources”in the progressive reform. In the last, the dissertation generalizes the special and distorted pattern of Chinese economic growth, thinks about the trends and the dilemmas faced by Chinese economy in the later stage of transformation, and points out the direction of future and further research.Through theoretical analysis and empirical research, this dissertation draws the following conclusions:Firstly, in order to ensure economic growth and realize the macro development goal of economy, China in transforming period carries out financial repression and strongly-controlled financial policy to make sure the high efficiency of financial mobilization and financial transformation, provides the station-owned enterprises which are in low efficiency with great financial support through bank credit etc.At the same time, China enforced financial repression and all kinds of discriminatory credit policies to non-state-owned enterprises, and thus made it difficult for these firms to acquire necessary financial resource for development from formal financial tunnel. The two contrary policies finally lead to the low efficiency of initial configuration in financial system.Secondly, in the process of market oriented reform of state-owned restructuring, the state-owned economic sectors transferred the non-performing loans, rent of deposits and loans, and bad debt receivable to the non-state-owned economic sectors through business credit of chain debts and direct transfer of financial debts. Thus have resulted in the financial leakage and the“sunny production used amphibolous resources”afterwards. And the feedback effect of“sunny production used amphibolous resources”has a positive secondary correction effect to the low initial allocation efficiency of financial system, and has supported the high economic growth in a certain period.Thirdly, it is hard to sustain in the later period of China’s economic transformation to sacrifice the efficiency of financial system and social equity. And it will be substituted by high financial efficiency and high economic growth. Therefore, it is of theoretical and realistic significance to solve the“paradox”and promote the healthy development of economic growth by dramatically changing the current financial repression and strict financial control, reforming the out of date financial system, relaxing financial control, and promoting reform of state-owned enterprises.