An Analysis of the Linkages between the Chinese Financial Structure and Economic Growth: Theory and Evidence

In this paper we introduce the theoretical difference between the studies of the financial development and the economic growth.By "The Theory of Dichotomy" and using recursive estimation in cointegrated VAR model,we analyze the relationship between the financial structure and the economic growth.There is a sudden structure change in the relationship between financial structure and economic growth in the period of 1999 Q1—2000 Q4 due to the economic and financial adjustment after the Asian Financial Crises.Then we evaluate the influence of the past economic policies in China on their relationship,especially the short-term impact and the long-term equilibrium.Thus we can assess the impact of bypast policies and present suggestions for the future reform of the financial system.