Financial Development Support For The Upgrading Of Industrial Structure Of Hunan Province

Abstract:The nature of finance which is likened to the booster of economic development is to realize the optimal allocation of resources. The financial development plays an important role in promoting the optimization and upgrading of a country or region’s industrial structure. In order to achieve the upgrading of industrial structure as soon as possible and keep the steady economic development, we must make full use of the supporting role of finance.Based on the study of literature, the paper defined several concepts about financial development and upgrading of industrial structure. We then expounded the theory of evolution and upgrading of industrial structure as well as the financial development theory. We also analyzed the process and mechanism that the financial development affects the industrial structureupgrading. According to large amounts of data, the paper described five stages and the present situation of Hunan industrial structure upgrading. The status quo of financial development was be elaborated from the perspective of bank credit, capital markets and financing structure.In the empirical analysis section, the paper used VAR model and several econometric methods including stationary test, cointegration test VAR model estimation, impulse response function, variance analysis and Granger causality test analysis the effect of financial development on Hunan Industrial Upgrading and High-tech Industry. The results show that indirect financing (mainly refers to bank credit) could significantly promote the Industrial Upgrading and High-tech Industry. However, the direct financing (mainly refers to the equity financing) only can affect the Industrial Upgrading and have no significantsupporting effect for high-tech industry.Finally, based on the empirical analysis and the current situation of financial development and industrial structure upgrading of Hunan Province, the paper gives some policy recommendation on the financial development advancing the industrial structureupgrading from the aspects of financial innovation, financial reform, the establishment of a multi-level capital market and optimizing the financial environment.