Study On Regional Differences And Club Convergence Of Financial Development In China

Finance is the central nervous system of the entire social funds’ movement and animportant force for promoting economic growth, as an endogenous variable and coreelement of the economy. The level of financial development on the spatial distributionof non-balance and geographical differences is an important factor causing regionaldevelopment differences. Based on the theory of financial development, regionaleconomics, finance geography and spatial economics, and combined with the currentsituation of China’s financial development, the article gives a systematic research toregional differences and club convergence in the finance development in order to obtainricher conclusions and more valuable policy implications.First, from the status overview of China’s financial development, the level hasgradually increased, but the structure of financial assets is irrational, the monetizationratio is too high，and financial risks concentrate overly in banks Banking system.Secondly, from the financial development Indicators of three regions, the leadingtrend of eastern region has an absolute gap and even tends to expand, compared to thecentral and western regions.Thirdly, based on the data of prefecture-level cities, the paper builds Theil index,and quantitatively measures the regional differences of financial development. Theilindex’s decomposition reveals the overall differences in the finance development, thesource and contribution of the differences. The trend of regional financial developmentdifferences shows “V” shape, and2005is the cut-off point; the intra-regionaldifferences has a very high contribution rate, while the contribution rate ofinter-regional differences increases year by year.Finally, drawing on the theory of economic convergence, the empirical analysisapplies in the convergence of China’s regional financial development. From2001to2005, there is significant convergence effect to national and three regions; while from2005to2010, there is no convergence effect to the eastern and central parts, but nationalregion and western part exist convergence phenomenon by significantly decreasedspeed. The spatial econometric model is superior to the traditional model, and there issignificant spatial spillover effect. By the exogenous method, the convergence ofChina’s financial development displays club effect, the convergence speed of westernregion is much larger than central and eastern regions. By the endogenous method, the low clustering region’s club convergence is more significant and the high clusteringregions’ convergence speed is low from2001to2005; but there isn’t convergence effectin any regions from2005to2010. It shows that the method of region’s division has abig impact on the test results of convergence of financial development.The paper raises several policy implications based on the results in the previouschapters.