Research On Financial Agglomeration’s Effect Mechanism On Regional Economic Growth

With the development of economic globalization and information, the global resources are able to flow rapidly, and the financial activities are becoming increasingly frequent. The rapid development of financial industry causes the phenomenon of financial agglomeration more and more obvious. Different levels of financial centers are gradually formed, which profoundly affect the economy. This paper mainly studies the financial agglomeration’s effect mechanism on regional economic growth.Over the last few decades, scholars at home and abroad have carried on the positive exploration on financial development theory, financial agglomeration theory and the relationship between financial agglomeration and economic growth. After reviewing and commenting on the domestic and foreign related theories and literature, this paper analyses the current situation of the development of finance in China, and then calculates the location quotient of financial industry and analyzes the financial agglomeration status and characteristics in China based on the analysis of indexes calculated above. The result shows that our country takes a rapid expansion of financial scale during the period of 2000-2012. The financial products and services are also gradually diversified. However, the regional financial development difference is very large. Most financial resources are concentrated in the eastern of China. The financial agglomeration of China has obvious regional differences. The areas which have high level of financial agglomeration are more likely to concentrate in the eastern coastal region. The finance development of the central and southern China lags behind and the financial agglomeration level is generally low.Next part, this paper mainly focuses on two aspects of the effects of financial agglomeration and economic growth. Firstly, this paper studies the interaction between financial agglomeration and economic growth based on a macro-spatial point of view. By calculating the global Moran’I and local Moran’I index, we find that there exists a positive spatial dependence in both financial agglomeration and economic growth during the period of 2000-2012. The spatial correlation increased at first and then decreased. The rate of economic growth has not shown obvious spatial dependence. On the aspect of the spatial interaction between financial agglomeration and economic growth, the financial agglomeration is positive affected by the level of economic development of the surrounding areas. The degree of financial agglomeration of the surrounding areas will also have a positive effect on the level of economic development in central area. Before 2010, the financial agglomeration didn’t have a obvious spatial correlation with the rate of economic growth. After 2010, financial agglomeration begins to have a negative effect on the rate of the surrounding economic growth. The surrounding financial agglomeration will have an inhibitory effect on economic growth. The regions of high level of financial agglomeration mainly concentrates in the three major economic circles of the eastern China. There exists a large area of low level of finance in the central and southern China. Double high areas in financial concentration and economic development are mainly located in Bohai Economic Rim and Yangtze River Delta. Double low areas in financial concentration and economic development are mainly located in the central and western regions of China. Therefore, the financial agglomeration and spatial correlation of the economic growth have obvious regional differences.Secondly, this paper studies the financial agglomeration’s effect mechanism on regional economic growth from microscopic perspective. On the base of theoretical analysis, this paper argues that financial agglomeration will play its role on economic growth through five functions of finance: "gathering savings", "allocation of resources", "corporate governance", "management of risk", "facilitating the exchange of goods and services", forming four effect mechanisms: "financial efficiency", "capital accumulation", "adjustment of industrial structure ", "technological innovation", and finally achieves economic growth. On the base of theoretical hypothesis, we set theoretical model and use the 2000-2012 provincial panel data for empirical analysis. On the one hand, this paper use national data econometric analysis to study the widespread impact of the financial agglomeration of regional economic growth. On the other hand, we also use the data of the eastern, central and western areas in China in order to analyze regional difference. The result shows that: financial agglomeration can promote economic growth in China. The more developed the financial sector are, the more significant improvement of financial agglomeration to economic growth. From the perspective of inter provincial level, the coefficient of capital accumulation channel is largest and pass the significant test, which means the financial agglomeration is mainly effect mechanism on regional economic growth indicating that the economic growth of China mainly depend on the promotion of capital. From the perspective of inter region level, different region have obvious difference, however, there are also some common problems. The financial efficiency of these three regions are not significant. The positive effect of the capital accumulation is maximal in the eastern China, followed by the central China. The effect of the capital accumulation is not significant in western China. The effect of industrial structural adjustment is tiny in both the eastern China and the western China. To some extent, this mechanism may restrict the regional economic growth. This indicates that financial agglomeration, industrial structure and the development of economic do not form a good interaction specially in central China. The financial agglomeration can promote economic growth through the effect mechanism of technological innovation in the eastern China and western China.Based on the above conclusions, this paper put forward some policy suggestions:(1) we should find out the reasonable orientation of government functions and make different regional financial policy.(2)We should optimize the financial structure and establish diversified financing channels.(3)We should establish multi-level financial centers to promote regional financial interactions.(4)The financial industry should take the real function of guiding industry and increase its support for technological innovation.(5)We should pay more attention to the construction of financial ecology and optimize financial ecologic environment.