The Research On The Economic Welfare Effect Of Financial Inclusion In China

Financial exclusion, which is harmful to economic growth, is a major factor causes poverty, income inequality and regional development inequality in developing countries. In order to reduce and eliminate financial exclusion, some scholars put forward the concept of financial inclusion which leads kinds of international organizations and countries including China pay attention to. Studying the relationship between financial inclusion and economic welfare, can not only enrich the theory of financial development, but also testify the effectiveness of current financial reform in our country. Besides, it can be evidence for financial development policy. Thus the topic is of theoretical significance and practical significance.Firstly, we introduced the related theories of financial inclusion and economic welfare. Financial inclusion is related to the theory of financial development, the theory of inclusive growth and the theory of financial development right, while economic welfare is based on the welfare theory of Bentham utilitarianism, the welfare theory of objectivism theory, the capacity theory of Amartya Sen and Maslow's hierarchy of needs. Then we analyzed the influence mechanisms between financial inclusion and economic welfare in two aspects. On one hand, the development of financial inclusion can promote income, consumption and living directly through the services of savings, credit, insurance and wealth management. On the other hand, the development of financial inclusion can stimulate economic growth and lower the threshold, which promote economic welfare of people indirectly.Secondly, based on access, usage and cost, we constructed a three-dimensional evaluation index system to measure China's financial inclusion degree from 2005 to 2014. The results showed that the overall level of financial inclusion in China is low and the level in each region differs significantly. Meanwhile, we chose 13 indicators to calculate the economic welfare index of residents from income, consumption and living adopting the method of factor analysis. Then we made an empirical test on the impact of China's financial inclusion on the economic welfare of residents, which using the method of fixed effect and two stage system GMM through provincial panel data. The results showed that financial inclusion had a positive effect on improving residents' economic well-being.Finally, we put forward several suggestions to promote the development of financial inclusion in order to enhance residents' economic welfare from three perspective. Besides, we believed that expanding the accessibility, improving the usage, and reducing the cost of financial services can be effective.