A Research On The Relationship Between China's Financial Development And Economic Growth

The relationship between financial development and economic growth plays a very important part in the finance theory study, and lies in the centre of finance research. In the traditional economic growth theory, economists usually focus on the real part, while the importance of finance is always neglected. As the Financial Deepening Theory is accepted, this situation has been changed. Now it is widely accepted that financial development can promote economic growth mainly in two ways: increasing investment and improving economic efficiency.Financial Development Theory, which was first raised by Mckinnon and Shaw, mainly includes Financial Deepening Theory and Finance Control Theory. And they believed that the aim of the financial reform should be financial free development, and that the government should reduce its control of financial development, and that markets should play a greater role in resource configuration. Financial Control Theory, which was first raised by Stiglitz, has made Financial Development Theory more perfect.Economists have been quarrelling with each other on the relationship between financial development and economic growth. And they cannot agree whichever financial structure can better promote economic growth. And it is what they are quarrelling and their divarications that are the emphases of this paper and what will be tested in this research.After reform and opening-up, China has gained great economic growth as well as financial development. And at the same time, some problems come up in the financial systems, especially the low efficiency which is considered as the important reason of the high exertion of economic growth. Thus, the influence of financial development on economic growth in China is more evident in terms of quantity than quality. So to improve the quality of economic growth, China should concentrate on the liberalization reform of financial system, which will lead to a more efficient financial development and economic growth. Furthermore, drawing lessons from the experiences of underdeveloped countries' financial reforms is significant for China.Based on the financial development theories and economic growth theories, this paper does a detailed research on the relationship between China's financial development and economic growth. And at the same time, a lot of empirical studies are made to explain the special phenomenon in China financial development. Not only do these empirical studies support the related theories, but also improve the integrity of this research on China.