An Empirical Study On The Relationship Between Financial Intermediary And Economic Growth

After 30 years growth, Chinese economy has made remarkable achievements, has achieved great economic leap that capitalist countries need to take a century to finish. By the end of 2014, Chinese gross domestic product (GDP) achieved more than 60 trillion Yuan for the first time, opened a new journey of economic development. Chinese economy has been able to achieve so much success in just a few decades, thanks to the ownership reformation in a certain extent,it means that the establishment of a socialist market economy.The specific measures that China takes is advocating "Guotuiminjin",but it must ensure that the state-owned economy sector dominated in economy at the same time,which make a huge room for development of Chinese private sector, the private economy began growing rapidly. As an important supplement to the state-owned economy, private economic has tremendous growth potential, which is an important engine to promote the continued development and growth of Chinese economic growth in the future. On the one hand, the development of private economy helps to create an economic full of fair competition, which will help to stimulate the vitality of the socialist market economy, help improve the efficiency of socialist market economic system, which is the meaning in the system level. Private economy sectors ran by private operators, which means the private economy has a hard budget constraint, self-financing, which make it have the ability to conduct business decisions independently, making the private economic agents become "economic man" in the true sense, it’s able to operate according to market rules, which gives the private economy an unique economic status, because fostering a competitive economic environment is the key to the development of the socialist market economy,which requires a large number of clear property rights of economic entities to act in accordance with market rules; on the other hand, as a division of the economic,and a member of socialist market economy system, the private economy can create its own income, then makes contribution to economic growth. The development of private economy must be accompanied by the growing demand for funds, but because of some other reasons, it’s difficult to meet this demand, the financing problem of private enterprises has become a universal phenomenon, which obviously restricts the release of private economic growth potential. The rational allocation of credit funds to meet the financial needs of the private sector of the economy and ease the problem of financing private enterprise, and then freeing the growth potential of the private economy is a key step in achieving sustained economic growth in China. From the perspective of bank credit structure that reflect the allocation of credit resources,as well as the perspective of financial intermediaries scale, this article explains relations between financial intermediaries and economic growth through building a two-sector economic growth model (the state-owned sector and the private sector),and it will give the financing problem of private enterprise a whole new meaning.This article includes a total of six chapters:Chapter 1:Introduction. It describes the background, the significance of the research,research methods, Chapters arrangements,innovation and shortcomings of this paper. Chapter 2:Literature Review. It reviews the literature that relevant to the subject, and gives a brief summary. Chapter Three:China Economic Growth and Development of financial intermediary. This chapter analyzes the status of Chinese economic development around the research theme, the status of private economic development of China, Chinese Bank, reviewed the history of the development of financial intermediary, and describe the functions of the Chinese Bank. Chapter 4:Theoretical models. Around research topics, combined with the actual development of the Chinese economy, building a two-sector model (state sector and private sector). By solving the two-sector model,we can obtain the economy growth expression in equilibrium state, accordingly proposed the theoretical assumptions of this paper:(1) expand the scale of financial intermediary sector development, which enhances the capacity of credit supply, it will meet macroeconomic funds demand in a wider range, help to increase the amount of the whole social capital, which can stimulate economic.growth; (2) changes in the structure of bank credit, which means more credit resource moving to private sector of the economy, the private sector will share more capital stock, it will relieve the financing problem of private enterprises, and then release the growth potential in the private economy, thus ultimately stimulate economic growth. The fifth part,empirical analysis the relation between economic growth and financial intermediary, we build an vector auto regression model, combined with the researches of King and Levine (1993), Ru yong Tan(1999), Yong hong Zhong (2004) and some other scholars,we choose Per capita GDP as indicator that reflects Chinese economic growth, choose M2/GDP as indicator that reflects the scale of financial intermediary, choose bank credit structural (PRII:The ratio of total credit resource and the credit resource that non-state-owned enterprises owned) as indicator that reflects the allocation of credit resources, choose TEC(the ratio between the technology market turnover and GDP)as indicator that reflects the progress of technology, choose INV (the ratio between the fixed asset investment and GDP), it uses annual data (1990-2013) as a research sample, the result of this test shows that in China, bank can influence economic growth, and economic growth also can influence bank.on the one hand, the development of financial intermediary scale will lead to Chinese economic growth; on the other hand, changes in the structure of bank credit have a negative effect on Chinese economic growth. We found that the empirical results are not fully consistent with the theoretical analysis,for this difference, the author believe that in reality world, the capital does not have separability, compared to the size of the private sector, The amount of credit available is too small, Far below the scale of capital that efficient investment need,This may reduce the efficiency of private investment, the financing difficulty faced by the private sector of the economy has not really eased. Based on the above analysis, it was found that, overall, the relation between financial intermediary and Chinese economy growth is health, but in some areas need to be improved, for example, credit resource management needs to be improved, these issues need timely resolved, otherwise it will have a negative impact on the economy. The sixth part, policy recommendations: describes the policy implications of this paper. There are three main aspects, first of all, continue to implement prudent monetary and credit policy, promote financial deepening smoothly; secondly, build a sound financing system for private enterprises; and finally, let the market play a decisive role in the financial market.