The Effect Of Industrial Strctural Upgrad On Financial Development

Zhejiang has developed rapidly since the reform and opening up. Its regional GDP growth rate reached 13.2% which consistently ranked in the nation. The private economy, the regional industrial clusters and the professional markets are the characteristics of Zhejiang economy. With the optimization and upgrading of industrial structure, the proportion of a modern industrial sector is much higher than the traditional sectors. Particularly, the manufacturing sector accounts for 45% of GDP, which becomes a major driving force in promoting regional economic growth. However, it is noteworthy that there are still some key manufacturing problems and structural flaws:its long-driven investment and export-oriented, extensive mode of development, high cost of regional resources and environmental, the imbalance between investment and consumption problems, and soon. The global financial crisis made these problems more apparently. This is mainly due to the low level of economy structure, weak capacity of independent innovation and low added value of products. Therefore, strengthening the capacity of independent innovation, accelerating the transformation and upgrading of the manufacturing sector is urgent. And whether the process of upgrading the industrial structure or the high-investment, high-risk, high-yield technology innovation activities, perfect and convenient financial services are needed to be matched. Take Zhejiang Province as an example, bank financing dominated the financial structure of the region, especially state-owned banks, which lead to more emphasis on state-owned enterprises and less financial support for SMEs. Distortions in the financial structure of this region will inevitably lead to structural distortion of regional financial resources, the deterioration of bank asset quality, lack of regional technology innovation and industrial upgrading power disruption problems.Therefore, it is necessary and important to summarize the successes and shortcomings in regional economic development of Zhejiang Province and study the mechanism among regional financial development, technological progress and industrial upgrading. We aimed to find out the effective financial structure and operating mode for enhancing the independent innovation capability and promoting industry structural upgrade.This Paper is divided into five parts:first, we review recent theory and empirical researches about financial development and industrial structural upgrade, illuminate the necessary of the research and introduce the frame. Second, we analyze the promotion mechanism and the interaction mechanism between industrial structural upgrade and financial system, especially focus on the technology innovation as an important way to upgrade the industrial structure; third, we describe the state of financial system, technology and industrial structure of Zhejiang Province, and analyze the impact of financial development on industrial structural upgrade. Then, we build a panel data model based on Multivariate Driving Theory of technology innovation and Five Factor Model., testing the effects of financial development on industrial structural upgrade and on technical progress separately, so as to have a comparative analysis on the mediating effect of technological innovation. Finally, we get the empirical conclusions and put forward some suggestions on the development of financial system. The Conclusions as that:The scale of financial system has significant positive effects to technical progress of manufacturing and industrial structural upgrading; bank concentration has insignificant positive role in promoting the industrial structural upgrade, but insignificant negative effect to technological progress; private enterprise and individual loans to total loans is significantly impede technological progress, but not significantly promote the upgrading of industrial structure; financing structure has an inconspicuous inhibitory effect, while has a significant positive impact on promoting industrial structural upgrading. So, we conclude that the scale of financial development in Zhejiang effectively promote the technological innovation and industrial upgrading, but the banking sector structure, financing structure and the loan structure does not effectively promote technological innovation, but lead to the formation of unrealistically high of industrial structural upgrading by a pile of money.