Research On Financial Efficiency Upon Economic Growth

Finance is an important aspect for the development of the economy of a country that should not be overlooked. Chinese financial system, including the microstructure of the system, has been improving ever since the reform and open up of Chinese economy. However, there still exist problems in the economy such as the low efficiency, which has been a drag on the growth of the economy. Therefore, the paper will make a tentative study on financial efficiency of Chinese economy, explore the mechanism of how financial efficiency impacts economic growth, and apply the middle reaches of the Yangtze River and Zhejiang Province as a sample to demonstrate the relationship between financial efficiency and economic growth. This paper consists of five sections:The first section describes the background and significance of this paper followed by a literature review regarding financial efficiency and economic growth. There are two main school of the analysis regarding the economic efficiency:one is that the financial efficiency can promote economic growth, the other is financial efficiency can promote economic growth provided it reaches a certain level.The second section first describes and analyzes the theory of financial efficiency and economic growth, and then concludes the theories and proposes a comprehensive theory of financial efficiency and economic growth to analyze the impact of financial efficiency. Lastly, a transmission mechanism graph is generated to describe the way of how financial efficiency impact economic growth.The third section firstly makes a system that describes the financial efficiency of middle reaches of the Yangtze River; then, it analyzes the status of Jiangxi, Hubei, Anhui and Hunan province with Zhejiang province as a comparison. Finally, the paper analyzes the financial efficiency of the middle reaches of the Yangtze River and Zhejiang Province based on the method of factor analysis.The forth section establishes a panel data model based on the results of factor analysis, followed by the analysis of the relationship between financial efficiency and economic growth, applying the Yangtze River district and Zhejiang Province as the sample.The fifth section presents some recommendations based on all conclusions aforementioned.In conclusion, the paper shows that:the financial efficiency is mainly manifested in the utilization rate of funds, savings-investment rate and the investment return; the gap between middle reaches of the Yangtze River and Zhejiang, financial efficiency is not significant. In addition, empirical research shows that the improvement of financial efficiency is conducive to economic growth.