Financial Development and Economic Growth in China

Investment Management and Financial Innovations, 13 (3), pp. 8-18, 2015

11 Pages Posted: 2 Oct 2015 Last revised: 31 Mar 2016

See all articles by Yan Wang

Yan Wang

Leicester Business School, De Montfort University

Xiaoyu Li

University of Huddersfield - Business School

Hussein Abdou

The Lancashire School of Business & Enterprise; Department of Management, Faculty of Commerce, Mansoura University

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

Date Written: September 30, 2015

Abstract

The purpose of this paper is to examine the relationship between financial development and economic growth. In particular, the authors examine the impact of financial development on the growth of primary, secondary, and tertiary industries in China. Ordinary Least Square (OLS) multiple regressions are applied on a set of data from China for the period 1978 to 2013 to determine the effects of financial development on economic growth, while controlling for other macroeconomic variables, namely labor force, capital growth, inflation rate and export growth. The empirical results show that financial development has a negative effect on economic growth in general, but on the growth of the tertiary industry in particular. By contrast, it is found that financial development has no significant effect on the primary and secondary industries. The findings offer policymakers some useful insights that more attention may need to be paid on developing capital markets and providing more investment choices/opportunities for Chinese households. This paper is different from most of the previous studies as it uses up-to-date data (1978-2013) from China capturing the effects of financial development on economic growth in addition to other macroeconomic factors.

Keywords: economic growth, financial development, China, three major industries (primary, secondary and tertiary

JEL Classification: N1, O11, O43

Suggested Citation

Wang, Yan and Li, Xiaoyu and Abdou, Hussein and Ntim, Collins G., Financial Development and Economic Growth in China (September 30, 2015). Investment Management and Financial Innovations, 13 (3), pp. 8-18, 2015. Available at SSRN: https://ssrn.com/abstract=2667697

Yan Wang (Contact Author)

Leicester Business School, De Montfort University ( email )

The Gateway
, Leicester, LE1 9BH
United Kingdom

Xiaoyu Li

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

Hussein Abdou

The Lancashire School of Business & Enterprise ( email )

The Lancashire Law School
Corporation Street
Preston, PR1 2HE
United Kingdom
00441772894700 (Phone)

Department of Management, Faculty of Commerce, Mansoura University ( email )

Mansoura, 35516
Egypt

Collins G. Ntim

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

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