Research On Relationship Between The Scale Of Informal Finance And Economic Growth In Guangdong

A country’s economic situation is closely related to the development of the country’s financial system. The financial system of China has typical dual-structure characteristics. Nowadays, informal finance which is an indispensable part of the financial system is bound to have influence on economy. Guangdong produces the highest GDP in our country. Informal finance widely exists in urban and rural areas in Guangdong Province. The scale of informal finance cannot be ignored. In recent years, as the establishment of Guangdong Informal Finance Association and Guangzhou Informal Finance Street, studies of informal finance in Guangdong Province is more and more valuable. Policies and suggestions based on related research will further optimize the allocation of resources of informal finance.This paper takes the study on relationship between informal finance and economic growth as the core. This paper also analyzes the differences between informal finance and formal finance, the mechanism how informal finance effect economy and the present situation of informal finance in Guangdong. Then the paper takes the method of Economy and Finance Correlation Coefficience θ to estimate the scale of informal finance in Guangdong Province and the 21 cities of Guangdong. Use the estimated results and related economic data to create a panel data collection and use system GMM(Generalized Method of Moments)to conduct the empirical research on the relationship between informal finance and economic growth. Then use difference GMM to conduct the empirical research on the relationship between informal finance and thrice industrial growth.Informal finance can theoretically promote economic growth through various channels, but because of some defects, it may also hinder the economic growth. The empirical results show that the informal finance has certain promoting effect on economic growth. In more developed areas of Guangdong, formal finance plays more important role than informal finance. But in less developed areas in Guangdong, informal finance plays more important role than formal finance. In the study of thrice industries, informal finance obviously promote the first and second industry growth, but shows non-obvious effect on the promotion or inhibition of the third industry. Finally, this paper based on the above empirical results, proposes policies and suggestions of how to treat informal financial to better promote economic growth.