Financial Development And Export Performance

Since the reform and opening up, the level of financial development has risenrapidly in China. Meanwhile, export trade has maintained high-speed growth.Researching and promoting the positive effect of financial development on exportperformance have important significance for our country to deepen the reform offinancial system and transform the development mode of foreign trade. In view of this,this dissertation applied financial development as institutional factors to theframework of traditional trade theory. Then the multinational panel data of216countries and regions in1996-2010and industrial panel data of China’s provinces in2003-2010were collected. From the perspective of trade quality, trade size and trademarginal, this dissertation selected and estimated a series of indicators to fully reflectexport performance, including export technological sophistication, the rate of exportgrowth, extensive margin and intensive margin etc. And then the dissertationsystematically and thoroughly studied that financial development had impact onChina’s export performance through the three channels of FDI technology spillover,capital allocation efficiency and external financing constraints. This dissertation hadfinancial development as an institutional factor applied to the frame of traditionaltrade theory. The study found that: under the framework of H-O-S the effect of factorendowment on international trade will be subject to the level of financial development.The efficient financial system can not only increase the relative production share ofindustrial manufactured goods, but also help to keep the share of exports and tradebalance in an open economy. The country which has a high level of financialdevelopment possesses a comparative advantage in manufacturing industry. Then thedissertation generalized three channels of the effect of financial development onexport performance: the channel of FDI technology spillover, the channel of capitalallocation efficiency and the channel of external financing constraint. From thechannel of FDI technology spillover, a developed financial system helps the hostcountry enterprises to absorb the technology spillover effect of FDI and promotes acountry’s export performance improvement. From the channel of capital allocationefficiency, financial development contributes to the elimination of informationasymmetries and allocates capital to the higher-return projects, so as to improve theelement structure, enhance the capital labor ratio and promote export growth. From the channel of external financing constraint, the more developed financial system acountry has, the higher export tendency enterprises have. The tendency is moreobvious in the industries with high external financing dependence. Financialdevelopment increases the exports of industries with stronger external financingdependence by the ease of financing constraints. The country which has higher levelof financial development possesses a comparative advantage in industries withstronger external financing dependence. Through the investigation of financialdevelopment and export performance in different levels of China, the study found thatafter nearly three decades of development, the level of financial development andexport performance in China has significantly improved. In regional and industriallevels, financial development is positively correlated with export performance. Basedon FDI technology spillover channels, we empirically researched the impacts offinancial development on export technological sophistication. The study shows thatfinancial development has an significant and robust role in promoting exporttechnological sophistication. FDI technology spillover effect depends on the level ofdomestic financial development. In a certain extent, financial development canpromote positive effects of FDI technology spillover on export technologicalsophistication. Based on the channel of capital allocation efficiency, we empiricallyresearched the impacts of financial development on export performance and foundthat: During2003-2010years, the average value of regional capital allocationefficiency is0.521in various provinces of China and that of industrial capitalallocation efficiency is0.497. Financial development and capital allocation efficiencyhave a significant positive impact on export performance of Chinese industries. In acertain extent, capital allocation efficiency can deepen positive impacts of financialdevelopment on export performance. Based on the channel of external financingconstraint, we empirically researched the impacts of financial development on exportperformance and found that: financial development have particularly significantinfluence on export dual margin of industries with high external financing dependenceand improve the possibilities of access to export markets and the volume of trade. Wefound that the lower level of financial development the provinces have, the strongerexternal financial dependence the industries have, the more serious financingconstraint the export enterprises will face. Financial development has strongerexplanatory power on export dual marginal of the provinces through the channel ofexternal financing constraint.