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Analysis On Financial Intermediations Growth in China
Analysis On Financial Intermediations Growth in China
Analysis On Financial Intermediations Growth in China
Airiti Press
ABSTRACT
Financial intermediation plays an important role in the modern economy. To better promote
the development of financial intermediation, its meaningful to analyze the causes that have
positive effects on finance and study the spatial differences of financial intermediations
growth in China. Based on the time-series data related to economy and finance from 19912011, this paper uses the stepwise regression method to eliminate the multicollinearity, and
draw the conclusion that the value-added of the tertiary industry and per capita annual
disposable income of urban households are promoting the development of financial
intermediation. Besides, this paper makes use of cluster analysis to classify the financial
intermediations development of 31 provincial administrative regions in China. The
government should speed up the development of financial intermediation and further
improve its service function on the real economy, elevate the financial security to the
national strategic level and accelerate the internationalization of finance.
Keywords: Financial intermediation; Causes; Cluster analysis; Spatial differences
1. Introduction
Finance is the all currency and credit activities associated with economy.
Modern economy is a market economy in essence, which is a kind of developed
currency credit or financial economy. Modern economy is that of fundamental role
in the allocation of resources by market mechanism, and finance has a very
important position in setting up and improving the national macroeconomic
regulation and control system. Financial intermediation is connected to all
aspects of the national economy. It can be more in-depth and comprehensive to
reflect the economic activities from tens of thousands of enterprises and
institutions, at the same time, interest rates, exchange rates and financial
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could adjust the scale, speed and structure the economic development, and
promote the development of economy through the monetary central bank on the
basis of price stability.
In the modern economic life, monetary fund, as the important wealth and
economic resources, becomes the lifeblood and communication medium in the
whole social economic life. Almost all economic activities cannot be apart from the
monetary capital movement in the modern society. By the domestic perspective,
finance is connected to various departments, various industries, each unit of
production and operation, each social member and home, and becomes a national
important lever and means to manage, supervise and regulate the national
economic operation. From the international perspective, finance becomes the ties
for international political economic and cultural exchanges, international trade,
foreign investment and international economic and technological cooperation. The
contribution of the financial intermediation to the national economy is reflected in
both direct and indirect aspects. Direct contributions are embodied of financial
intermediations added value to economic growth. Indirect contribution refers to
the financial intermediation engaging in the production and business operation
activities to drive the development of related industries and increase its value,
but the value is not directly measured by the system of national accounts.
Therefore, the financial intermediation is connected with the economic growth
in a country, and many scholars engaged in the research of the relationship
between economic growth and the development of the financial intermediation.
Wu and He [6] analyzed the relationship between economic development and
financial intermediations growth of Anhui Province by the canonical correlation
analysis. The result shows that the effect of the financial growth on the economic
development is weak, which means that there may be a demand-following
model. Based on the result, they proposed that China should grasp the
opportunity of the development of the tertiary industry in the course of regional
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to
the
relationship
between
economic
growth
and
financial
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Table 1. Data for causes of financial intermediations growth in China.
Financial
intermediation
(100 million
yuan)
Y
Primary
Secondary
Tertiary
Per capita
disposable
income of
income of urban
rural
annual
X2
households
X3
(yuan) X4
Per capita
annual net
households
(yuan)
X5
1991
1,056.3
5,342.2
9,102.2
1992
1,306.2
5,866.6
11,699.5
1993
1,669.7
6,963.8
1994
2,234.8
1995
7,337.1
1,700.6
708.6
9,357.4
2,026.6
784.0
16,454.4
11,915.7
2,577.4
921.6
9,572.7
22,445.4
16,179.8
3,496.2
1,221.0
2,798.5
12,135.8
28,679.5
19,978.5
4,283.0
1,577.7
1996
3,211.7
14,015.4
33,835.0
23,326.2
4,838.9
1,926.1
1997
3,606.8
14,441.9
37,543.0
26,988.1
5,160.3
2,090.1
1998
3,697.7
14,817.6
39,004.2
30,580.5
5,425.1
2,162.0
1999
3,816.5
14,770.0
41,033.6
33,873.4
5,854.0
2,210.3
2000
4,086.7
14,944.7
45,555.9
38,714.0
6,280.0
2,253.4
2001
4,353.5
15,781.3
49,512.3
44,361.6
6,859.6
2,366.4
2002
4,612.8
16,537.0
53,896.8
49,898.9
7,702.8
2,475.6
2003
4,989.4
17,381.7
62,436.3
56,004.7
8,472.2
2,622.2
2004
5,393.0
21,412.7
73,904.3
64,561.3
9,421.6
2,936.4
2005
6,086.8
22,420.0
87,598.1
74,919.3
10,493.0
3,254.9
2006
8,099.1
24,040.0
103,719.5
885,54.9
2007
12,337.5
28,627.0
125,831.4
111,351.9
13,785.8
4,140.4
2008
14,863.3
33,702.0
149,003.4
131,340.0
15,780.8
4,760.6
2009
17,767.5
35,226.0
157,638.8
148,038.0
17,174.7
5,153.2
2010
20,980.6
40,533.6
187,383.2
173,596.0
19,109.4
5,919.0
2011
24,958.3
47,486.2
220,412.8
Source: China Statistical Yearbook (2012).
204,982.5
11,759.5
21,809.8
3,587.0
6,977.3
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326
Here:
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665.8187
Std. error
765.8045
t-Statistic
Prob.
0.869437
0.3983
X1
0.486226
0.295519
1.645329
0.1207
X2
-0.038612
0.069658
-0.554309
0.5875
X3
0.253022
0.058462
4.327949
0.0006
X4
-1.840432
0.344055
-5.349239
0.0001
X5
-0.185844
1.846007
-0.100673
0.9211
R-squared
0.993095
7,234.605
Adjusted R-squared
0.990793
6,842.302
S.E. of regression
Sum squared resid
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Coefficient
656.5288
6465451.
16.04677
Schwarz criterion
16.34520
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Log likelihood
-162.4910
Durbin-Watson stat
431.4671
F-statistic
1.094192
Prob (F-statistic)
0.000000
1.000000
X2
X2
X3
X4
X5
0.994078
0.991053
0.994819
0.998566
0.998777
0.995796
0.992788
1.000000
0.994326
0.990641
1.000000
0.995119
1.000000
X3
X4
X5
1.000000
the
original
independent
variable
is
likely
to
become
not
shows the coefficient, t-statistic, its corresponding probability and R2 of all the
explanatory variables.
Now reorder the explanatory variables according to the value of R2: X3, X 2, X1,
X5 and X 4. Based on X3, add other explanatory variables by stepwise regression.
Add X 2, take X 2, X3 as the explanatory variables, the regression results for
the estimation equation is:
(1)
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probability are 0.3318 and 0.0284 respectively. R2 = 0.9776, R 2 = 0.9752, Fstatistic = 393.4936 and its corresponding probability is 0.000000. Given the
significant level = 0.05, in the t distribution list,
the coefficient of
X 2 cannot pass the t test, so X 2 should be eliminated.
Add X1, take X1, X3 as the explanatory variables, the regression results for the
estimation equation is:
(2)
Figures in brackets represent t-statistic of the coefficient, the corresponding
probability are 0.6260 and 0.0006 respectively. R2 = 0.9767, R 2 = 0.9741, Fstatistic = 377.6217 and its corresponding probability is 0.000000. Given the
significant level = 0.05, in the t distribution list,
the coefficient of
X1 cannot pass the t test, so X1 should be eliminated.
Add X5, take X3, X5 as the explanatory variables, the regression results for the
estimation equation is:
Table 4. Results of the regression.
X1
Coefficient
0.582592
X2
0.110832
X3
0.117788
X4
1.143571
X5
3.92584
2
t-statistic
19.93086
25.03962
28.03928
17.73703
19.03753
Prob.(t)
0.0000
0.0000
0.0000
0.0000
0.0000
0.954353
0.970587
0.976403
0.943046
0.95018
R2
329
(3)
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probability are 0.0002 and 0.4077 respectively. R2 = 0.9773, R 2 = 0.9748, Fstatistic = 387.6385 and its corresponding probability is 0.000000. Given the
significant
level
0.05,
in
the
distribution
list,
, the coefficient of
X5 cannot pass the t test, so X5 should be eliminated.
Add X 4, take X3, X
(4)
Figures in brackets represent t-statistic of the coefficient, the corresponding
probability are 0.0000 and 0.0006 respectively. R2 =0.9879, R
=0.9866, F-
level
0.05,
in
the
distribution
list,
,
the coefficient of X 4 can pass the t test, so X 4 should be maintained.
The equation (4) is obtained after eliminating the multicollinearity, which
shows that growth of financial intermediation is most influenced from the tertiary
industry and the disposable income of urban households. The equation explains
that value-added of financial Intermediation will increase 23.74 million yuan
when the value-added of tertiary industry increases 100 million yuan, other
things being equal. Other conditions remain unchanged, when per capita annual
disposable income of urban households increases 1 yuan, the value-added of
financial Intermediation will increase 118.82 million yuan.
Whether other factors, such as the production of the primary production and
secondary industry, affect the growth of financial intermediation or not? The
partial correlation coefficient is a useful tool to solve this problem.
In general, partial correlation coefficient is used to analyze the relationship
between two variables for accurate analysis to rule out other factors. The partial
correlation coefficient is the indicator of calculation between two variables after
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other factors fixed. It can be explained that an indicator describes the close degree
of a certain correlation between the dependent variable and an independent
variable after the influence fixed of other variables. Its calculation formula is as
follows.
Assume the main determinants of every simple correlation coefficient between
the two variables for the dependent variable y and independent variable x 1, x2, ...,
xp is
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330
Here:
In the formula:
iy, yy, ii are respectively the algebraic complement of main determinants
for riy, ryy, rii, iy, yy, ii are symmetric determinant;
k... is the other independent variables which are fixed; r yx
ik...
is the partial
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Table 5 shows that tertiary industry production and the disposable income of
urban households are most closely related to the growth of financial
intermediation after other factors excluded or fixed. This also coincides with the
results of multiple regression analysis from one side view.
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Table 5. The partial correlation coefficient of 5 independents to the dependent.
Partial correlation coefficient
0.391002
Tolerance
0.001875
T(34)
P-level
2.47712
0.01837
6
ryx
1.2345
ryx
2.1345
-0.141678
0.001201
-0.83454
0.40980
4
ryx
3.1245
0.745189
0.001914
6.51592
0.00000
0
ryx
4.1235
0.809986
0.005393
-8.05352
0.00000
0
-0.025985
ryx
5.1234
0.002191
-0.15157
0.88042
3
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value-added of financial intermediation, the gross regional product and the total
investment in fixed assets on financial intermediation in 2011 as the variables to
classify the financial intermediations development of 31 provincial administrative
regions in China according to the principle of cluster analysis. The relevant data
is shown in Table 6.
Cluster analysis is a kind of methods to study individual based on the
characteristics of the objects itself, whose purpose is to group similar objects. The
principle is: individuals with larger similarity are in the same category, and
individual difference of the different kinds is very big. Its basic idea is: First, n
samples (or variables) , which will be clustered is seen as a category, the total is n
categories; Then to calculate the clustering statistical distance between the two
categories (or similarity coefficient) by the selected method, the most closely
relationship between the two categories is merged into a category, the remaining
unchanged, namely by n-1 categories; Again according to the same calculating
method to calculate the distance between new category and other categories (or
similarity coefficient), then the two categories have the closest relationship to be a
category, the remaining unchanged, namely get n-2 categories; So, reduce a
category each time, until all the samples (or variables) are classified as only one
category.
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Table 6. Variables and objects of cluster analysis (100 million yuan).
Value-added
of financial
intermediatio
Total investment in
Gross regional
product
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fixed
assets
on
financial
intermediation
Beijing
2,215.4
16,251.9
38.1
Tianjin
756.5
11,307.3
34.7
Hebei
746.0
24,515.8
24.1
Shanxi
519.3
11,237.6
1.7
Inner Mongolia
447.5
14,359.9
45.2
Liaoning
755.6
22,226.7
56.7
Jilin
207.7
10,568.8
4.9
Heilongjiang
350.8
12,582.0
9.3
Shanghai
2,277.4
19,195.7
23.3
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Jiangsu
2,600.1
49,110.3
55.4
Zhejiang
2,730.3
32,318.9
25.1
Anhui
503.9
15,300.7
58.2
Fujian
862.4
17,560.2
23.2
Jiangxi
357.4
11,702.8
23.6
Shandong
1,640.4
45,361.8
33.3
Henan
868.2
26,931.0
16.6
Hubei
674.6
19,632.3
30.3
Hunan
501.1
19,669.6
19.6
Guangdong
2,916.1
53,210.3
30.6
Guangxi
445.4
11,720.9
17.8
Hainan
105.2
2,522.7
6.4
Chongqing
704.7
10,011.4
2.5
Sichuan
868.1
21,026.7
31.8
Guizhou
297.3
5,701.8
0.8
Yunnan
456.2
8,893.1
4.1
Tibet
31.7
605.8
0.5
Shaanxi
432.1
12,512.3
2.9
Gansu
145.1
5,020.4
10.4
Qinghai
62.6
1,670.4
0.3
Ningxia
134.2
2,102.2
2.7
Xinjiang
288.8
6,610.1
4.7
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For the variables p, the individuals n, dij is defined as the distance between the
individual i and individual j, its
calculating formula is:
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S2k
is
the
variance
of
variable
Minkowsky Distance:
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From
the
Figure
1,
Jiangsu,
Shandong
and
Guangdongs
financial
intermediation are relatively developed, and its consistent with gross regional
product and total investment in fixed assets. From the total perspective, financial
intermediation in Northwestern is relatively undeveloped due to the weakness of
basic construction, capital accumulation and education. On the contrary, in the
eastern coastal
335
area, rapid economic development contributes to the rapid growth of financial
intermediation. The development of finance depends largely on the development
of real economy and the investment, so its easy to understand the backwardness
of the western regions. The government should encourage the foreign direct
investments in western regions, and further promote the economic growth to
change the situation in China.
4. Conclusions
By the study and analysis above, we have policy recommendations as the
conclusion.
(1) Speed up the development of financial intermediation and further improve its
service function on the real economy.
By the study above, the development of the primary industry and the
secondary industry is not closely related to the development of financial
intermediation. On the one hand, the government should strengthen the financial
intermediation to service the production of the primary industry and the
secondary
industry.
At
present,
the
development
of
urbanization
and
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intermediation, only in this way, it could be run with steady and high efficiency to
meet the needs of the development of real economy.
(2) Elevate the financial security to the level of national strategy, and strengthen the
prevention of financial risk for the tertiary industry and resident life.
Financial risk is a global and centurial puzzle. The government should realize
its huge influence on the national economic development from the financial risk
on the level of the national strategy. China should gradually increase the
proportion of direct financing in total social investment, and play an active role in
allocation of social resources, establishing and improving the requirements of
market-oriented financial mechanism. At the same time, China need to optimize
social financing structure, improve the efficiency of resource allocation of financial
intermediation, which is effective to prevent and control financial risks, maintain
financial stability and meet financial security requirements to make the financial
intermediation serve the social public better, and promote the healthy growth of
tertiary industry.
336
(3) Accelerate the internationalization of financial intermediation, pay attention to
the depth of the financial market and increase the efficiency of the financial
intermediation.
From the regression analysis and cluster analysis above, the own efficiency of
financial intermediation is not very high, so it is necessary to adjust the internal
structure of the financial intermediation to improve the working environment of
the financial intermediation and merge into the system of international finance.
Financial globalization is the trend of financial intermediation development
during the modern times. The internationalization of finance will speed up the
process of the economy and finance integrating into the international community,
and enhance the international competitiveness of Chinas financial institutions.
Therefore, China should optimize the financial structure, strengthen the financial
innovation ability, and heighten the comprehensive competitiveness of financial
enterprises. Meanwhile, paying attention to the construction of financial
development and financial cultural environment, raising the efficiency of financial
production and enhancing the national financial well-being, then China will be a
powerful financial country.
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ACKNOWEDGEMENTS
This article is subsidized by the National Natural Science Foundation of
China, Spatial Layout and Development Path of Strategic Emerging in China
(No.: 71273276).
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