Financial Development,Market Deregulation and Growth: Evidence from China

In this paper, the relationship between finance and growth is analysed in the context of an endogenous growth model with government regulation and intervention. Our theoretical model suggests that financial intermediaries can affect the process of economic growth in several ways. Using the recent Generalized Method of Moments (GMM) techniques, we test our model in a panel data set covering 29 Chinese provinces over the period of 1990–2001. Empirical results show that financial development and government deregulation in the financial sector significantly promote China's economic growth.