Regional Financial Development And Economic Growth

Since the reform and open policy,the rapid growth of China's economy gives prominence to the central role of finance in economic growth.Therefore,the relationship between financial development and economic growth has become the focus point of Chinese scholars.Plenty of literature did the theoretical analyses and empirical researches on this issue from the integrated and regional perspectives.But the existing literature paid less attention on the influence of the relationship between financial development and economic growth to the institutional context of China's economy transition,especially ignored the analysis of the relationship as well as the impact of economic growth mode transformation under the background of China's current financial control.As a result,it will make the theoretical research away from practical phase of China.Thus it is difficult to come to a reasonable policy recommendation.Therefore,studying the impact of Financial Control Policy on regional financial development and the growth efficiency of financial development,combined with the reality of China's economic transformation background,which has important implications for the further development of China's financial system.Since the reform and open policy,China's rapid economic growth benefits from the support of institutional designs in the transition process.The financial control system is one of the designs.It is because of the existence of this particular financial control makes Chinese economy obtain a sufficient number and low cost of money supply in this transition process.But for a long time the negative effects of inefficient allocation of resources gradually appear under the financial control.Especially in 1994 after the local government began to intervene the control of financial institution according to the reform the fiscal tax system,negative effects are more obvious.With the further promote of financial commercialization,China's financial controls are gradually relaxed but they still exist.Financial commercialization developments also make the government,especially local government's financial controls,adds new meaning,not only the intervention in financial institutions and financial market activity but also the construction and improvement of financial ecological environment.Thus,the impact which the regional economic development and economic restructuring has brought is uncertain.On one hand,forced interventions and control measures distort the arrangement of capital in the produced subjects,which emerges a negative effect.On the other hand,local governments make great achievement of financial ecological improvement.This article is based on the above understanding to analyze the financial background of the transition under the control of regional economic growth and the effect of financial development.Firstly,the following article gives an empirical analysis of the economic growth effect of financial development in 29 sample areas of China.On the theoretical level,the analysis of the theoretical model examines the impact of government control of bank credit and economic growth.The result shows that after government intervention,the role of implicit guarantees will make banks reduce the expected risk of lenders.On the other hand,over the public service they provide,the cost of the bank loans management is also reduced,which will increase the number of funding mechanism entering the channel loans,thus easing the financial section of discrimination and promoting the development of the social economy.On the empirical level,after dividing the country group into 29 sample areas in accordance with the degree of financial control,they go through the empirical analyses.The result shows: Firstly,from the point of economic growth rate,the local government economic control has a negative effect on economic growth effect of regional financial development.After adding a dummy variable,a negative coefficient has been reduced.It means a series of reform measures of the banking industry had been effective in 1998.Indeed that affects the control of local government about resources,especially state-owned commercial banks,Thereby reducing the negative impact.Even though the degree of financial control of local government has been shrunk,economic control still had a negative impact on the growth of regional economic development.Secondly,from the effects of promoting the transformation of economic growth,relax controls on the economic resources by the local governments really improve the Chinese economic growth pattern from relaying on capital accumulation which is “extensive".In the other way,the reduction of the speed of capital accumulation and the growth rate of TFP,resulting from the reform of the economic,brings great positive impacts to economic development.However,the local governments preferring capital accumulation as a way for economic development would bring much adverse effects to the sustainability of economic growth.The result of the group survey indicates the same way.Also,for the region of stronger economic control,the regional economic development indicators would bring more negative influences.Therefore,financial control is not of good influence for the underdeveloped areas,regarding its negative impact on the sustainability of economic growth.Secondly,the author explores the usage of ICOR,as a measure of capital allocation efficiency,and the panel economic data for Chinese provinces from 1994 to 2013,adopting GLS to make a research on the capital allocation efficiency optimization of economic development under the economic control.The result shows: the economic development has positive impacts on the efficiency of capital allocation.However,under the economic control of local government,the impacts would be negative.Considering,the influence of the economic reform,the general effects is positive.This is shown in the regional survey,in which it can be seen that after the governments' loosen of economic control in 2002.This shows that the reform of marketization is more effective for weakening economic control.Due to the conclusion of the above analyses,this paper argues that China's financial reform should be consistent with the overall development strategy.There should adhere to financial reform control.By intensifying the financial commercialization reform,the wreath of local government is shrunk by the effect of finical commercialization.In particular now the various conditions of financial control have been changed.At the same time,with the reform of the financial system,completely removing the financial functions of finance will make the financial system the real economy.