A Study On The Relationship Between Financial Development And Industrial Upgrading Of Shandong Province

Finance is the core of modern economy. The upgrading in industries can be an important signal and objective reflection of economic development. In reality, the financial development and industrial upgrading promote mutually. Both the financial development and the economic development of Shandong Province are extensive yet weak and, the latter, is confronted with resource shortage and environmental pollution, thus making the industrial upgrading very pressing. How to boost the industrial upgrading through financial development and thereby to promote financial development has been an important issue that the economy of Shandong Province faces.This thesis, in view of the current status of the financial development and industrial upgrading in Shandong Province, applies the industrial structure,financial development theory and other multi-disciplinary theories and econometric approaches in order to delve into the interaction mechanism between financial development and industrial upgrading and, empirically, examine the interrelation between them. The study and its conclusion mainly focus on the following aspects:Firstly, the author introduces the relevant theories of financial development and industrial upgrading and makes a theoretical analysis of them, from which she arrives at a conclusion:finance develops when the formation mechanism, the orientation mechanism and the credit catalytic mechanism of the industrial capital work together to promote industrial upgrading; industrial upgrading, through its needs and supplies, exerts an influence on financial development.Secondly, the author, with some economic data in recent years, makes a concrete analysis towards the current situation of financial development and the evolution process of industrial development in Shandong Province. The financial business in Shandong Province is characterized as follows:it improves gradually yet it is still at a disadvantage compared to the nation-wide average; the proportion of direct financing and indirect financing imbalances; the transformation rate from deposits to investment is low yet is higher than the national average. In the mean time, low level of industrial structure.deviation between industry output and employment structure, and irrational inner structure are the current situation of the industrial structure of Shandong Province.Thirdly, the author, with the economic data from 1978 to 2009, makes an empirical analysis of the correlation between financial development and industrial upgrading by way of measurement model. The author concludes that the financial development and industrial upgrading of Shandong Province are correlated and balanced in the long term. Besides, there exists a bidirectional cause and effect between them, but their time span is inconsistent.Finally, considering the present circumstances in Shandong Province, the author makes four proposals. Above all, Shandong should attach great importance to the capital market, better financing structure and broaden the financing channels. In the second place, it should quicken the financial development of different levels and improve the transformation rate from deposits to investment. Next, it should improve and perfect the finance and industry policies and specify the range that the finance supports industry so as to make the financial resources fully perform its function of resource allocation.Last, there should be a strategic orientation for Shandong's industrial upgrading.