WEI Yanjie, etc：Financial Liberalization, Financial Development and Investment Level Difference in China

Abstract：This paper focuses on examining the effects of Chinese financial liberalization and development on investment level difference, using dispersion in investment level.The results consistently show that while financial liberalization increases investment level difference among firms by allowing more productive firms to expand their capital investment, the financial development is negatively associated with it.Each of the seven subcomponents of the financial liberalization index has positive effect on firm-level difference, and the most important influence is from the credit deregulation.The undesirable effects of financial liberalization are found that it cannot reduce investment level difference among industries.There is also full evidence supporting that financial development can reduce industry-level difference and lead to lower volatility in macro-economy.Moreover, the findings also suggest that increased product market competition and firm-level technological disparity tend to have positive effects on investment level difference among firms.

Key words： Financial Liberalization    Financial Development    Investment Level Difference

source:Finance & Trade Economics ,No.3,2015