Introduction
In the present time of rapid economic development, the relationship between financial development and international trade has become increasingly close, from the financial development and international trade in recent years, various data, when the financial market disorder, international trade will also be subject to corresponding interference, the same, when the international trade is not open, the country’s economic growth rate will be controlled.
Therefore, the current economic development is the most urgent task is to clarify the relationship between financial development and international trade, only to smooth out the relationship between financial development and international trade, to understand their mutual impact, in order to better take strategic measures to avoid harm and promote the common development of finance and international trade.
Overview of financial development and international trade
The so-called financial development refers to the changes in the financial structure, such changes are both long-term and short-term. Financial development is conducive to the optimal allocation of resources and improve social and economic efficiency. In 1973, Mckinnon and Shaw proposed the theory of financial shallowing and the theory of financial liberalization, respectively, and they elaborated on the relationship between financial development and economic growth from two different perspectives: “financial inhibition” and “financial deepening”. “They elaborated the dialectical relationship between finance and economic development from two different perspectives. Shi Yongdong (2003) conducted an empirical study on the relationship between financial development and economic growth in China using Granger causality test and econometric analysis based on the Cobb-Douglas production function framework.
It is concluded that there is a two-way causal relationship between economic growth and financial development in China in the Granger sense, and a specific value of the contribution of financial development to economic growth is also derived. While international trade refers to cross-border transactions of goods and services, the level of over trade of a country reflects to a certain extent the level of economic development of that country.
International trade is an important means for countries in the world to participate in the international division of labor and achieve smooth social reproduction, and is an important way for countries in the world to be closely connected. From the definition of financial development and international trade, it can be seen that there is an inevitable link between the two.
In the process of social and economic development, one of the inevitable problems is the issue of financial development, and accelerating financial development can promote better development of social economy. And the rapid development of the economy will inevitably drive the country’s trade growth, making the country have to carry out imports and exports trade, it can be said that international trade is the inevitable result of rapid economic development.
From the definition of international trade can be seen, the object of trade to international, the development of international trade will also inevitably drive the development of finance, making China’s financial gradually to the international market.
Financial development and international trade influence each other
1. The impact of financial development on international trade
(1) the impact of financial development on the scale of international trade
At present, financial development is the focus of China’s economic development, the country is also paying more and more attention to financial development, in this environment, the scale of financial development is also expanding.
With the expansion of the scale of financial development, the national economy will continue to grow, and the improvement of the economic level will inevitably lead to the development of international trade. From the viewpoint of economic theory, the development of a country is affected by financial development is much greater than the impact brought by external financing industry, in other words, the scale and level of financial development has a huge impact on the development of the economy. Financial development helps to increase the proportion of financial assets for savings, improve the level of social investment, which in turn leads to economic growth, which in turn promotes the continued development of international trade and provides great convenience for international trade.
The scale of financial development has a direct impact on the scale of international trade. Only to promote the stable and sustainable development of finance, in order to continue to grow the scale of international trade, so as to achieve the stable development of international trade.
(2) financial development to promote the transformation of international trade
The main ways of traditional international trade are distribution, agency, consignment, exhibition and sale, bidding, etc. However, with the development of financial markets, this traditional international trade pattern is gradually broken, making international trade more diverse.
Financial development has realized the gathering and concentration of capital, which helps scale production and operation and achieve planning economic benefits, and in this mode of scale economic benefits, foreign trade processing, barter trade, foreign exchange commodities, leasing trade and other ways also arise, and then better promote the growth of international trade.
(3) Financial development has changed the structure of international trade
From the commodity structure, countries with a high degree of financial development, the financial reliance on stronger technology and knowledge-intensive products are more important, the country will focus on the production of these products and expand their share in export trade.
While countries with a lower degree of financial development, labor-intensive products with a weaker reliance on finance will have an advantage in international trade. Thus, it can be seen that financial development will change the structure of international trade, prompting countries to adjust their trade structure according to their own advantages.
In the case of China, China’s financial industry has achieved rapid development, not only for the development of the domestic economy to add fresh blood, while the role of the world economy has become more and more prominent, especially after the 2001 WTO accession, China’s closer ties with the rest of the world, the financial market is gradually open, the scale of international trade is also expanding, the domestic product structure is also in line with the development of the financial industry and upgrade. It can be said that the more developed the financial region, the more developed its trade, such as the United States, the United Kingdom and other developed countries, the high degree of financial development of these countries is evident to all, one of the most prominent features of these countries with high financial development is the high degree of trade development.
(4) Financial development affects international trade relations
Since the outbreak of the financial crisis in the United States in September 2007, the financial market has been in an unstable state, and has caused a chain reaction around the world. More and more countries began to fear that the financial crisis continues to heat up, and become more and more cautious in their international trade strategies. It can be seen that, in the post-crisis era, the economic status of the United States has been shaken, and the trade relations between countries have also undergone great changes, and such changes will directly affect the development of the economy.
(5) Increase the risk of international trade
With the rapid development of finance, the application of Internet finance will also become inevitable, however, Internet finance combined with Internet technology, the virtual nature of the network makes Internet finance has a greater risk, this risk will also inevitably penetrate into the international trade, making the international trade process there is a certain amount of risk.
Under the current social situation, the development of Internet finance has become the main direction of financial development, in the Internet finance to international trade brings a favorable side at the same time, also makes the international trade risk is also growing. For the main body of international trade, in the process of international trade with the help of the Internet, the information is easy to be stolen by unscrupulous elements, thus causing significant losses, which is not conducive to the development of international trade.
2. The impact of international trade on financial development
International trade plays an important role in a country’s economy, national trade can regulate market supply and demand, perpetuate social reproduction, promote the full use of production factors, promote the optimization and upgrading of industrial structure, but also to strengthen economic ties between countries and promote economic development. Blackburn and Hung argue that trade liberalization has promoted the innovation and development of financial markets, greatly reduced the agency costs of financial intermediaries, and enlivened financial markets.
Aizen man theoretically investigates the impact of international trade liberalization on financial liberalization. He argues that trade liberalization makes the cost of financial control increase, and the increase in cost leads to financial reform. Accelerating the development of international trade is the inevitable result of rapid economic development, and the development of international trade also provides many opportunities for financial development, which makes the financial market start to go international and be improved in continuous practice.
Conclusion
In summary, the financial development and international trade is the mutual influence between the financial development to promote the development of international trade, while the rapid development of international trade also provides a guarantee for the innovation and development of finance. And through the study of this paper found that the impact of financial development on international trade is more obvious than the impact of international trade on financial development.
The speed of financial development directly affects the country’s foreign trade, therefore, when developing international trade, it is necessary to recognize the impact of financial development on international trade, and only by maintaining the stable and rapid development of finance and maintaining the coordination of finance and international trade, can we achieve sustainable and stable economic growth.