The Effect Of Foreign Bank's Development On Economic Growth In China

The effect of foreign banks development on the host country mainly concentrates on two aspects, one is the effect on the finance of the host country, the other is the effect on the economy of the host country. Since the entering of foreign banks into China in 1979, foreign banks in China have being increased gradually in the scale of development, the researches about the effect of foreign banks on China also gradually increased. Among them, the theory about the effect of foreign banks on finance in China has been basically mature, however, the theory about the effect of foreign banks on economy in China still remains a problem. Many scholars have studied on this theory to prove that foreign banks can affect our economy. On this basis this paper makes a further study on how foreign banks affect economic growth by using theoretical analysis, and what kind of effect that foreign banks brought to China's economy by using empirical analysis.The effect of foreign banks on the economic growth of host country has consists of two steps, firstly, through some certain channels the foreign banks can affect the savings, investment and resources allocation of host country, which will then put effect on the economic growth, secondly, foreign banks finally affect the economic growth by three conduction mechanism, i.e. the savings, investments and resources allocation. So, we first analyze the conduction mechanism of foreign banks to economic growth in host country, and then study the effect channels of foreign banks to economic growth in China by the three of conduction mechanism involving savings, investment and resources allocation. Finally, we use the data of foreign banks and economic growth in China to carry out an empirical test, the results indicates that the relationship between foreign banks and economic growth in China correspond to our government's initial purpose in introducing foreign banks, and also correspond to the general rules of economic development. That is foreign banks can promote economic growth in China. On these bases some policy suggestion have been proposed to promote foreign bank's development and the economic growth in China.