The Analysis Of China’s Informal Fance On The Influence Of Economic Development

There is a huge demand for funds in the development process of China’s privateenterprises, but it is very difficult to get financing from the formal financial institutions.The formal financial institutions have the ownership discrimination and the scalediscrimination that they prefer to lend to state-owned enterprises, rather than privateenterprises. Therefore, financing has become a bottleneck for the development ofprivate economy. Compared with formal finance, informal finance has comparativeadvantages in many aspects; these advantages have decided that it is more suitable toprovide financial services for private enterprises. As a supplement to the formal finance,the informal finance provides financial support for the development of privateenterprises. However, the informal finance which out of the financial regulatoryauthorities has some irregular and unsafe factors that may have a negative impact oneconomic development. For a long time, the government’s attitude to informal financehas not been clear. The informal finance has been excluded from the financial systemand has no legal status in China. In recent years, with the development of the privateeconomy, the government gradually realized the rationality of informal financialexistence and changed its attitude towards it. In2012, the establishment of Wenzhoufinancial comprehensive reform pilot area shows that the informal finance has beenattached great importance to the central government. The informal finance appears to bemore and more legalized.The informal finance has both positive and negative effects to the economicdevelopment.To study the effects of the informal finance on economic development hasan important significance for us to understand and use the informal finance. In thispaper, using the research methods of theoretical and empirical analysis, the author hasstudied the impact of informal financial development on economic development.Specific research ideas are as follows.Firstly, the paper defined the concept of informal finance, compared the differencesbetween informal finance and formal finance, summarized the comparative advantagesof informal finance and analyzed the development stages of China’s informal financeand organization forms. At the same time, the paper detailed the financial developmenttheories of the research on the relationship between financial development andeconomic development, including the theory of financial repression, the financialdeepening theory and financial constraint theory. Then, we used the theoretical analysis to qualitative research on the impact ofinformal financial development on economic development. It analyzed the positiveinfluence of the informal financial development to economic development, and also thenegative influence. At the same time, this paper estimated the size of China’s informalfinance. The method to estimate the scale of informal finance is by compared andselected. Then, this paper used the1995-2011statistical data, to estimate the amount ofinformal finance in China.In the part of empirical research, this paper studied the informal financialdevelopment impact on the economic development of our country from two aspects.One is to study the informal financial impact on economic growth from a holisticperspective; the other is by industry, we investigated the influence of informal financeto growth in the second industry growth and to the tertiary industry. In this study, inorder to eliminate the effect of heteroscedastic, first of all, the various time sequencesmust be a logarithmic scale. Then using the unit root test verifies to make all the timeseries are stationary. And on this basis, the paper analyzed the co-integrationrelationship between data. Finally we used the Granger causality analysis to test thecausal relationship between variables. In addition, this part also established the VARmodel between the informal financial development and economic growth, using theimpulse response analysis to study the effect of the informal financial development oneconomic growth.Finally, this paper summarized two conclusions. One is from a long-termperspective, the informal finance has promoting effect on economic development, and itshould be standardized. The other is the informal finance may exist and develop for along time; the government should provide support and guidance to its development.Then, on the basis of this study, considering actual situation of China’s informalfinancial development as well as the results of previous studies, we presented somerelevant policy suggestions about how to effectively use the informal finance topromote economic development.