Research On The Relation Between Financial Repression And Economic Growth In China

The article deeply analyzed the effects that financial repression policy has on the economic growth from two respects of theory development and positive research. China adopts the financial repression policy over a long time. This kind of policy has essential characteristic and historical changing course of repression degree different from other developing countries. It can be proved using Johnson co-integration that the relaxation of financial repression in China promote the financial deepening thus advance economic long-term growth. The article composes of three parts.The first part analyzes the phenomenon of financial repression existing extensively in developing countries and carries on the documents retrospection on the three stages of the financial repression theory achievements of taking shape and developing. Part two is the key point that the article studies. The author selected the means of interest rates and historical data of the legal deposited reserve rates in the article, structured the synthetic index of financial repression using principle components analysis approach. The author utilizes the Demetriades-Model to carry on co-integration examination on financial deepening, economic growth, financial repression and the real deposit interest rate and drew the conclusion that the financial repression policy was not good to the financial deepening. Experiences proved that the financial repressions formed barrieres to the long-term economy growth in China. Part three reviews Latin-Amer- ica and Asia countries and regions financial liberalization practices. Summarizing the experiences and lessons of positive and negative respects, the article proposes to relax financial repression gradually with economic development. Gradual financial liberalization is the direction of financial reform of our country.