Research On The Effect Of China’s Financial Development On Manufacturing Upgrading

At the Nineteenth National Congress of the Communist Party of China,Chairman Xi mentions that we will build a modern strong socialist country by 2050,which is an important strategic plan to realize the great rejuvenation of China.To implement this strategic deployment,we must build a modern economic system and strive to develop the real economy.On the one hand,China’s manufacturing industry has achieved a breakthrough with the acceleration of industrialization,its added value to GDP maintains a high level,and manufacturing has become a pillar industry of China’s real economy;On the other hand,compared with other developed countries in the world,China’s manufacturing remains not strong and its position hasn’t changed.At the same time,finance is considered to be the heart of economic system.Its function of pooling funds and allocating funds plays an important role in supporting manufacturing upgrading.But firom the interests of financial industry,the development of finance will plunder the profits of manufacturing,and there may be financial speculation in manufacturing enterprises,which may suppress the upgrading of manufacturing industry.Therefore,it is quite necessary to study the effect of China’s financial development on manufacturing upgrading,and comprehensively analyze the effect of financial development on China’s manufacturing upgrading from different perspectives,which is the content of this paper.The paper firstly combings previous research findings about financial development and manufacturing upgrading,then it analyses the process,channels,and mechanisms of financial development support for manufacturing upgrading.After analyzing the current situation of China’s financial development and manufacturing upgrading,the paper selects four variables representing the scale of finance,the efficiency of finance,financial structure and manufacturing upgrading,using data from 1990 to 2016 and builds the VAR model.The result shows that the expansion of financial scale can effectively promote manufacturing upgrading,when the ratio of loans to GDP increases by one percentage,the added value ratio of high-tech manufacturing will increase by about 0.77 percentage,and its contribution runs up to 56%;While improvement in financial efficiency inhibits manufacturing upgrading to a certain extent;And there are two periods of lag in the promotion of financial structure optimization for China’s manufacturing upgrading,but in the long term,when the proportion of direct financing increases by one percentage,the added value ratio of high-tech manufacturing will increase by about 0.21 percentage,and its contribution of support maintains at about 22%.Based on the conclusion,this paper gives corresponding suggestions on how to strengthen the supporting function of China’s financial development to manufacturing upgrading,including improving the construction of capital market system,strengthening policy support to manufacturing industry,standardizing business development in financial institutions and attaching importance to technical innovation in manufacturing enterprises.