Study On Market Failure During The Process Of Finance Deepen

Since nineteen seventies', with the development of finance restrain and finance deepen theory, many countries have practiced to promote the economy growth through finance deepening. The gist of finance deepen lies in realizing an equilibrium by using market power, but most of these countries did not touch the goal and the market became invalid. Why did the market become invalid during finance deepening? It becomes a task that how to overcome the market failure during finance deepening process.On the basis of home and abroad finance deepen theory and the finance deepening practice in eastern countries, this paper analyzed this problem from several points of view by using the method of positive analysis, normal analysis, qualitative analysis and quantitative analysis. This paper concludes that China is now undertaking the finance deepening. Also this paper discussed the reason of the market failure facing Chinese economy and the policy to over come the market failure.The main conclusions are as follows.(1) Finance restrain is generally existed in developing countries, and the process of finance deepening is to promote the economy growth by using market power.(2) Financial crisis in eastern countries in 1997 is a typical example of market failure in the process of finance deepening.(3) China was all along under the condition of finance restraint before nineteen nineties'.(4) At present, China is now in the process of finance deepening.(5) There is still market failure in Chinese finance deepening, such as the quantitative economy growth but not qualitative the economy growth. Low efficiency is the main symphony of market failure in the process of finance deepening in China.(6) The market failure in China not only results from the flaw of finance marker(exterior effect, public goods, monopoly and information asymmetry), but also results from the market underdevelopment. Because of the former, the self adjusting mechanism of market has low efficiency ; because of the latter, the market cannot be established spontaneously. This two factors impede the process of finance deepening. In fact, the key is the underdevelopment of market and it pricks up the interior flaw of market.(7) The establishment of market system is a key to overcome the market failure in the process of finance deepening.