The Study Of Relationship Between The Finance Development And Economic Growth In China

During the past 30 years, the economic and financial development of China has attracted the worldwide attention. In the key period of financial system reforming and economical structure restructuring, is there some connections between the financial development and economic growth? What is the effect of financial development on China's economic growth? In this thesis, the author tries to investigate the relationship between financial development and economic growth of China and make preliminary answers to the questions that proposed above.Firstly, the author made a review on the traditional theories of financial development, and analyzed the transmission mechanism of financial factors on economic growth. Secondly, the author construed proper variables of financial development and economic growth, and analyzed the relationship of economic growth with China's financial scale, efficiency of financial institutions and financial stability respectively. Thirdly, the author set up the empirical VAR model to capture the dynamic relationship between financial development and economic growth in China. The data covered the period of 1995-2009. The conclusion is:the total amount of China's financial assets have exceeded the requirement of the real economy, and have negative effect on economic growth; improve the efficiency of financial institutions will promote the China's economic growth; although the excessive expansion of China's foreign exchange reserves play an important role in macroeconomic stability, but the total amount of reserves are too large and hinder the economic growth.In the end, based on the analysis above and the specialty of Chinese finance, the author made these propositions:in the process of financial development in China, we should maintain balance between the real economy and financial sectors, the expansion of financial assets should be based on the high quality; the efficiency of China's financial sectors must be further improved, the credit should be allocated more reasonable; control the scale of China's foreign exchange reserves, changes the management to promote the economic growth better.