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Finance & Accounting
Pages 10 (2510 words)
Finance and Accounting 1. Introduction China’s economy has been experiencing rapid growth since 1978 and has been the most rapidly developing economy in the world. The growth started with the reforms in 1978 and the Chinese economy has been maintaining the annual growth rate of about 9.8% since then…
The paper elaborates the relationship between the financial development and the economic growth in China with the help of researches that are carried out by many proficient researchers (Zhang, Lanfang and Susheng, 2012). Allen (2005 cited in Zhang, Lanfang and Susheng, 2012), an eminent researchers has commented that China has been an important example of flourishing economy who have experienced the fastest growth in finance in more than 30 years. But it should be noted that the financial sector is governed by the state and is underdeveloped even today. The relationship between financial development and economic growth is generally negative. With the help of the provincial data between the period of 1990 to 1999 Boyreau-Debray (2003 cited in Ljungwal and Li, 2007) indentified that financial intermediation has affected the local economic growth negatively. Hasan, Wachtel and Zhou (2009 cited in Ljungwal and Li, 2007) with the help of provincial data for the period 1986 to 2002 has also pointed out the fact that finance sector has negatively affected the economic growth of the country. But Chen (2006 cited in Ljungwal and Li, 2007) has argued the fact. By using the provincial data for the period of 1985 to 1999 had showed that financial development of China has contributed positively to the growth of the economy (Choong and Chan, 2011). ...