A Study On Relationship Between Financial Development And Trade Openness:Based On The Perspective Of Economic Growth Disparity Of Chinese Regions

Financial and trade are important driving factors in the process of deepening development of economic globalization. The relationship between financial development and trade openness which also impacts on the macroeconomic of a country, are becoming more crucial during the post-crisis era of financial crisis and European debt crisis.With the reform and open up of China, financial market has a sustainable development and the trade openness becomes more in-depth, but the unbalance of development in China also becomes more serious. While financial development and trade openness contribute Chinese economic development, they also cause the development unbalance between different regions in China. Chinese government must pay attention to the unbalance of regional growth; the regional polarization of development will intensify the conflicts, and will jeopardize social stability and economic development. Therefore, how to deal with the relation between financial development and trade openness has become an important issue in the process of China's further sustained and equilibrium economic development.Throughout the existing literature, domestic and foreign research mainly focus on the relationship between financial development and economic growth, as well as the relationship between trade openness and economic growth, and have accumulated a wealth of research results in these two areas. Since the U.S. financial crisis in2008, studies on the relationship between financial development and trade openness have been gradually on the rise. However, these researches suffer from the problem of lacking of systematic research and practice tests, which reduce their values on practical economics. This dissertation studies the relationship between financial development and trade openness with the bridge of economic growth, based on the perspective of regional disparities in China. The dissertation is devoted to theoretically explore the mechanism and pathway about financial development on trade openness, and then empirically analyzes this subject about China's present situation, finally makes policy recommendations based on characteristics of post-crisis era.The dissertation consists of7chapters:The first chapter is introduction. It introduces the background, study significance and relative concepts; meanwhile, it indicates the main contents, study structure and novelties of the dissertation.The second chapter is a literature review. It will cover four aspects:(1)regional disequilibrium development,(2) the relationship between financial development and economic growth,(3) the relationship between trade openness and economic growth,(4) the relationship between financial development and trade openness.The third chapter analyzes financial development and regional disparities in China. By establishing the "do by learn" theoretical model and using the convergence model, this chapter analyzes the convergence of regional economic growth and regional financial development, and then compares the speeds of change of the two. The results show that China's regional financial development convergence speed far outweighs the regional economic growth convergence speed, and regional economic growth difference per reduced1%, its financial development differences will be down to148.2%.The fourth chapter analyzes trade openness and regional disparities in China. First, based the perspectives of domestic political and economic environment, changes in foreign trade and economic policy and management system, this chapter reviews China's trade openness30years of extraordinary course of development. Second, based on the theoretical analysis of three aspects of the accumulation of capital, technological spillovers and institutional changes, this chapter analyzes the action of mechanism about trade openness on regional divergence of growth, and empirically analyzes the relationship of trade openness and regional divergence of growth in china by dynamic panel GMM model. The results show that trade openness can narrow regional disparities in China through capital accumulation and technological spillovers, prompting the backward areas growing faster than the developed areas, thereby reducing regional economic growth gap. However, due to the combined effect of the investment, human capital, as well as government action, in the long run, trade openness may expand the regional disparities.The fifth chapter empirically analyzes short-term relationships and long-term stability between financial development, trade openness and regional disparities in china. Based on the annual inter-provincial panel data from1992to2010and the panel VEC model, the empirical results show that there is a long-term cointegration relationship between financial development, trade openness and regional disparities. In the medium-to-long term, financial development and trade openness can both increase regional disparities in China; granger test found that there are three mutually causal relationships between financial development and regional disparities, trade openness and regional disparities, as well as financial development and trade openness.The sixth chapter analyzes mechanism of action and empirical studies of financial development and trade openness. First, this chapter presents the theoretical framework to study the mechanism of financial development impact on trade openness from the classical theory, AK endogenous growth theory and new trade theory. Second, it analyzes the pathway from the perspectives of financial development, technological progress, comparative advantage, exchange rate changes and institutional environment, and then empirically analyzes this subject about China's present situation. Finally, combined with the background of the current international financial crisis and the outbreak of the debt crisis in Europe, it analyzes the impact and pathway of the international financial crisis on China's trade openness. The results show that financial development significantly promotes China's trade openness in real life which is full of uncertainty and asymmetric information.We conclude this dissertation in the seventh chapter and give some policy advices. On the basis of the conclusions, combined with the background of the current post-crisis era, the dissertation proposes appropriate measures and suggestions. We should not only pay attention to the impact of financial development and trade openness on regional disparities in China but also pay attention to balance the relationship between financial development and trade openness. By market regulations and government policy guidances, we expect to be able to better address the problem of umbalance between financial development, trade openness and regional economic growth.