A Study On The Approach To Promote China's Saving-investment Conversion Rate In A Financial Perspective

Capital formation,which is vital to a state's economic growth,is largely determined by the size of the savings and the saving-investment conversion.Under the condition of the market economy,since the two main bodies of savings and investment are often separated,the financial path,consisting of financial institutions and financial markets,becomes the main channel of the saving-investment conversion.Studies on the history of economic and financial development in the world revealed that,due to the financial repression,the lag of financial development and other reasons,the financial path of saving-investment conversion was often blocked,which made the valuable resources of savings could not be allocated efficiently,and affected economic development ultimately.As China's economy is entering into a new normal,the process of population aging is accelerating,and the savings rate is likely to continue to decline.The old growth model,in which the high savings rate supports the high investment rate,and promotes the economic growth,is not sustainable.Therefore,it is of theoretical significance and practical value to study the approach to promote the saving-investment conversion rate in a financial perspective.On the basis of a literature review of domestic and foreign studies on the saving-investment conversion and the relationship between savings and investment,this paper focuses on three issues by using normative analysis and positive analysis.Firstly,it investigates the relationship between the saving-investment conversion rate and the economic growth rate,and attempts to illustrate the mechanism that financial development affects economic growth by an endogenous growth model with the financial sector,which is established on the basis of Romer's growth model with endogenous research and development by using the paradigm of Western mainstream economics,relaxing the strong hypothesis that savings are converted into investment totally,and introducing the variable of saving-investment conversion rate.Secondly,it discusses the method of evaluating the saving-investment conversion rate of one state by using the Panel Co-integration Theory to establishing a panel data model with fixed effects and variable coefficients on the basis of research model proposed by Feldstein and Horioka.In order to discover problems,China's saving-investment conversion rate is then evaluated in several dimensions.The aggregate analysis is conducted on the saving-investment conversion rates of 19 nations of G20(including China,except European Union)from 1980 to 2011.The sectoral analysis is conducted on the saving-investment conversion rates of six nations,including China,Brazil,Japan,South Korea,United Kingdom and the United States,from 1946 to 2011.The regional analysis is conducted on the saving-investment conversion rate of 31 provinces of China from 1980 to 2012.Thirdly,it establishes a framework to analyze financial factors which affect the saving-investment conversion rate by summarizing potential financial factors according to the consumption theory,the saving theory,the investment theory and empirical studies,and building an index system with 4 first-level indicators and 25 second-level indicators.In order to disclose the financial factors,which affect China's saving-investment conversion rate,and their direction as well as degree,the Granger Causality Test is used to examine the saving-investment conversion rate and 25 financial indicators of China from 1993 to 2010.The conclusions are as follows.Firstly,the economic growth rate is determined by the saving-investment conversion rate,the savings rate and the marginal output of capital.Financial development affects economic growth through three channels:promoting the saving-investment conversion rate,affecting the savings rate and increasing the marginal output of capital.Secondly,China's saving-investment conversion rate was at a moderate level not only in the aggregate dimension,but also in the sectoral and regional dimension,higher than those of developed countries but lower than those of major Asian economies.There existed such problems as low conversion rate of the corporate sector and large regional differences.Thirdly,China's saving-investment conversion rate was affected by seven financial factors.Six of them had a positive effect,including credit-deposit-ratio,deposit,lending-deposit-spread,agricultural loan,volatility-of-stock-price and total wages which were sorted by the degree of influence in descending order.The last one,that was nonperforming-loan,had a minor negative effect.Based on the above conclusions,this paper puts forward policy suggestions from two aspects of improving financial rules and regulations as well as enhancing the vitality of financial market players.The former consists of increasing the credit-deposit-ratio of commercial banks,accelerating the market-oriented reform of interest rates,enhancing the inclusiveness of the financial system and improving regulations of capital markets.The later includes enhancing the financing function of capital markets,promoting the transformation and development of commercial banks,boosting the capacity of risk management and improving human capital management.