A Study On The Relationship Between The Financial Development And The Economic Growth In China

Since the reform and opening policy issued in1978, our economic growth and financial development has made many remarkable achievements. But how can the financial development and the economic growth affect each other? If there are some relations, what kind of interdependent relationships they are? How can all parts of the financial development affect the economic growth? Based on1992-2012macroeconomic data, we will analyze the relationship between financial development and economic growth. we are going to explore the above issues in next parts.In the essay we read the domestic and foreign literature at first, and then analyze the history of financial development and economic growth in China. Construct the appropriate variables of financial development and economic growth, mainly from the degree of financial deepening, financial structure and financial efficiency development to investigate the relationship between finance and economic growth. Then we establish a VAR model. Through empirical research in this paper, two important conclusions are drawn:firstly, the overall Chinese financial and economic relationship is mutual promotion, the promotion of economic growth can significantly promote financial deepening, but no significant promoting effect on financial institutions expansion, at the same time, the expansion of financial scale is mainly affected by the level of financial deepening; Financial development on economic growth promoting effect mainly displays for the improvement of financial deepening can greatly promote economic growth, and financial institutions is expansion effect was not significant; Which is the current situation of the low level of financial deepening and dragged down the financial system and the further development of the economic system reform. Second, the relationship between economic and finance, if the economic can grow, then our government will have more money to consume. But if our government use to much money, it maybe do harm to our economic. At the end we give several suggestions to our financial reform:firstly, strengthen the financial market legal system construction, moderate financial deregulation, encourage financial innovation; secondly improve the financial market structure, develop the direct financing market; at last, we should reduce the state’s influence both on the financial and economic.