Trade Effect Of China's Financial Development Research

The interdisciplinary research between the financial deepening theory and international trade theory has not been paid sufficient attention in the economic circle. The financial deepening theory seldom explores the influence of financial deepening on international trade, while the international trade theory has never refers to the impact from the financial deepening process. In fact, research of the influence of financial deepening on international trade can be very significant. If this influence is proved to exist, in other words, if it is proved that the financial deepening process has significant impact on international trade, it can not only bring the financial system in to play in guiding the international trade development, but also promote the further development of financial deepening theory. It therefore can be proved that the impact of financial development in economic growth lies not only in its investment and investment efficiency but also its indirect influence through international trade channel, which certified the priority of reforming the financial sector.Combined with China's financial system reform and foreign development since opening-up reform, this paper attempts to adopt the financial deepening and international trade relation theory to analyze the impact of financial system reform on foreign trade more comprehensively and historically through theoretical and empirical research, and to detect the way of enhancing the international competitiveness. In the theoretical part of this paper, it first makes a summary of the research of financial development and international trade relation theory by the scholars at home and abroad. Based on this, it further explores the interaction mechanism between them, making a point that financial depression will distort a country's trade and cause trade protectionism. Financial deepening can promote a country's foreign trade through the promotion of the formation of market-oriented interest rate, diversification of international trade financial services, formation of economies of scale as well as broadening capital market financing channels. In the empirical part, this article first reviews the foreign trade development and financial system reform process, selecting some important financial reform measures directly related to foreign trade to analyze the mechanism of impact of financial deepening on foreign trade. And then through the establishment of VAR model, using co-integration test and Granger causality test it makes a comprehensive analysis of the relation between financial deepening and foreign trade development from two dimensions.Through the empirical research, it is found that there is no long-run equilibrium relation between financial development and trade openness. However, the financial scale is the Granger cause of ever-increasing openness. Besides, there is a long-term equilibrium relation between financial deepening and the continuous optimization of foreign trade structure and the financial deepening is the Granger cause of the rising proportion of manufactured goods and capital-intense products in total exports. Based on the above empirical test results, I give suggestions to upgrade the international competitiveness of China's foreign trade from the macro-and micro-economic perspectives at the end of the paper.