The Research on Coupling Coordination Development between China's Provincial Financial Agglomeration

Frontiers in Finance Volume 1, 2015 doi: 10.14355/ff.2015.01.007

www.seipub.org/ff

The Research on Coupling Coordination Development between China's Provincial Financial Agglomeration and International Trade Yiqing He1, Qiong Yang2, Weihua Xu3 1.

Financial Securities Research Institute, Nanchang University, Nanchang 330031, China

2.

School of Economics and Management, Nanchang University, Nanchang 330031, China

3.

School of Science, Nanchang University, Nanchang 330031, China

1564602392@qq.com Abstract On the analysis of the interaction effect between financial agglomeration and international trade and by borrowing coupling

theory in physics, we use the improved entropy method to construct the coupled evaluation model about the system of financial agglomeration and international trade, which spans a period from the year of 2005 to the year of 2013 of 31 provinces, autonomous regions and municipalities of mainland China. The results of clustering analysis indicate that there exists coupling relationship of interaction and mutual constraints between financial agglomeration and international trade. In these 31 regions, coupling coordination development type spans six grades, and the coupling coordination degree of the eastern regions is much higher than that of the mid-western regions. With the deduction of time, the provincial general trend is transforming to a higher type of coupling coordination development. Especially, the coupling coordination degree of the middle regions (Jiangxi, Anhui, Henan, Hunan and Hubei) and the western regions (Sichuan, Chongqing, Yunnan, Guangxi and Xinjiang) has a clear upward trend.

Keywords: Financial Agglomeration; International Trade; Coupling; the Improved Entropy Method

Background With the deepening of international division of labor and the accelerating process of economic globalization, finance and international trade gradually merge, both inside and outside the area. Since China's reform and opening up, the scale of China's international trade is continuously expanding, and the foreign trade dependency continues to increase. With China's GDP reaching $4.303037 trillion in 2014, the foreign trade dependence was 41.53%. In the financial field, in 2014, China's financial added value stepped up to 2.98257 trillion Yuan and the sum of the financial institutions’ lending and deposit at the end of the year was 195.541465 trillion Yuan. At present, China’s financial agglomeration development still lags behind that of the western developed countries, the financial structure is not perfect enough, financial efficiency is still relatively low, and the function of the financial system doesn’t show enough. So the research about the inner link between financial agglomeration and international trade, exploring the right path of financial agglomeration’s effect on the scale and structure upgrading of international trade, has important theoretical and realistic significance to realize the sustainable development of China's international trade and promote the deepening reform of the financial system.

Literature Review Foreign scholars do the research on the relationship between finance and trade earlier, and acquire rich achievements. Alan M,Taylor(2011)[1], Kojo Menyah(2014)[2] and Jung Hur[3] found the result that there exists

59

www.seipub.org/ff

Frontiers in Finance Volume 1, 2015

long-term link between finance and international trade through the empirical analysis . Beck (2002)[4]and Fisman and Love (2004)[5]proved that among the countries in the world , compared with the general industry, the industry dependent on external capital can grow faster and the effect of financial development on the trade field has also been confirmed. The Do & Levchenko (2004)[6]uses the 1970 ~ 1999 financial development and export data of 96 countries to build the panel model and confirm the equilibrium relationship between financial development and trade. Domestic scholars also have some research about the financial development influence on international trade Neng Shen (2006)[7]explores the intrinsic linkage mechanism between financial development and international trade , and he considers that financial development and international trade maintain equilibrium relationship in the long term through research. Yaojun Yao (2010)[8]believes that financial development has influence on both the size and the structure of export trade.

Building the Coupled Development Model of the Financial Agglomeration and International Trade Coupling is a concept in physics, referring to the phenomenon that two or more systems or the movement ways are combined, through a variety of interaction and impact among each other. The coupling coordination degree is used for measuring coordination degree of systems’ components in the process of development, reflecting the trend of the system from disorder to order, reflecting interdependence, mutual coordination; and the dynamic relationship of mutual promotion among each subsystem under the circumstance of the positive interaction. Here, we can put the two sub-systems (financial agglomeration and international trade) through the phenomenon of their respective coupling elements interacting and affecting each other as financial agglomeration coupling and international trade.

The calculation of Index Weight: Improved Entropy Method Entropy value method is by use of information entropy to measure the variation of the parameter values of index system for comprehensive evaluation method. When using entropy method to evaluate comprehensive development level, the indicators are often faced with inconsistent regional units and too big difference for the same index, etc. In order to overcome these situations resulting in the deviation of the measurement results, we use so-called improved entropy method to make each index non-unitization, non-dimensional and nonnegative.

Comprehensive Development Level Evaluation Model For some years, to calculate the comprehensive development level of financial agglomeration and international trade, we can use the linear weighted method to measure its comprehensive development level. The formula is U s = ∑ nj=1 w sj u sj , where u sj shows the efficacy of the the indicator for system contribution and w sj is the corresponding weight.

Coupling Evaluation Model By borrowing capacitance coupling system model in physics[25], we can construct coupling evaluation model which can comprehensively reflect a whole effect and synergistic effect of the two systems(financial agglomeration and international trade).And the model can be represented as below: C =

U1 ∗ U 2 . Introducing the coupling ∏ (U1 +U 2 )

coordination degree model, the purpose is to objectively reflect system coordination development level of financial agglomeration and international trade, namely = D

C ∗ T , where T = aU1 +bU 2 . Where D for financial

agglomeration and international trade system coupling coordination degree; T for comprehensive evaluation index system of the financial agglomeration and international trade, reflecting the overall development level of contribution to the coordination degree; a and b of undetermined coefficients. In empirical research, a and b are given the values of 0.5, 0.5. According to the formula, we know that in the three periods the two coupling 1 coordination degree model expression is D = ∑ tk =1 D k . t

60

Frontiers in Finance Volume 1, 2015

www.seipub.org/ff

An Empirical Analysis of the Coupling Effect of the Financial Agglomeration and International Trade Index Selection and Data Sources Drawing lessons from past research results in this paper, we use 10 indexes from the banking, securities, insurance and financial density to measure four aspects of financial agglomeration level: number of banking financial institutions, staff of banking financial institutions, balance of financial institutions, financial institutions loan balance, shares (a shares), number of listed companies, density of insurance, depth of the insurance, premium income, added value ratio of financial industry, issuing amounts of rate listed companies. As for international trade scale, trade structure and trade performance measure, we use the following 9 indexes: total export, total import, total trade, mode and commodity structure ,FDI, foreign companies number, the second and third industry of FDI. All data come from “the China Statistical Yearbook”,” China's Financial Statistical Yearbook”," China Machinery Industry Statistics Yearbook”, “ Foreign Trade Statistics Yearbook”, the provincial statistical yearbook, China customs website, and separate province websites across the relevant statistical information.

The Empirical Result of Clustering Use the improved entropy method to get the weight of each index of the year 2005-2013 of 31 provinces (autonomous regions and municipalities), generate the weight into the comprehensive development, and respectively calculate the comprehensive development level of the financial agglomeration and international trade of system U1 and U2; calculate respectively the three time series coupling coordination degree between regional D1, D2, D3. The calculated results import SPSS19.0 clustering analysis, delimiting that the 31 provinces in three time series belongs to level category (table 1).

TAB.1THE COUPLING COORDINATION DEGREE BETWEEN FINANCIAL AGGLOMERATION AND INTERNATIONAL TRADE, CLUSTERING ANALYSIS SEQUENCE FROM 2005 TO 2013（A）

Region Beijing Tianjin Hebei Shanxi Inner Mongolia Liaoning Jilin Heilongjiang Shanghai Jiangsu Zhejiang Anhui Fujian Jiangxi Shandong Henan Hubei Hunan Guangdong Guangxi Hainan Chongqing Sichuan Guizhou Yunnan

2005-2007

2008-2010

2011-2013

D1

Cluster

D2

Cluster

D3

Cluster

0.480353 0.316735 0.245186 0.188358 0.178820 0.369010 0.167363 0.190258 0.521436 0.713817 0.500437 0.225954 0.331192 0.203599 0.417852 0.232706 0.272062 0.230308 0.734641 0.157323 0.142677 0.175076 0.219982 0.124847 0.158322

1 3 4 4 4 2 4 4 1 0 1 4 3 4 2 4 3 4 0 5 5 4 4 5 5

0.497790 0.337207 0.270861 0.180067 0.196756 0.410334 0.174841 0.206888 0.560939 0.730809 0.529183 0.246241 0.367542 0.224357 0.435288 0.257959 0.248742 0.236097 0.745577 0.191403 0.151705 0.233475 0.267123 0.129298 0.176995

1 3 3 4 4 2 4 4 1 0 1 4 2 4 2 3 4 4 0 4 4 4 3 5 4

0.529857 0.370677 0.294429 0.202701 0.210172 0.447797 0.201580 0.230359 0.582493 0.709476 0.536988 0.336495 0.385672 0.256069 0.496201 0.325240 0.270263 0.259639 0.814215 0.191374 0.151987 0.311700 0.338797 0.140709 0.193247

1 2 3 4 4 2 4 5 1 0 1 3 2 3 1 3 3 3 0 4 4 3 3 5 4

61

www.seipub.org/ff

Frontiers in Finance Volume 1, 2015

TAB.1THE COUPLING COORDINATION DEGREE BETWEEN FINANCIAL AGGLOMERATION AND INTERNATIONAL TRADE, CLUSTERING ANALYSIS SEQUENCE FROM 2005 TO 2013（B）

Region Tibet Shanxi Gansu Qinghai Ningxia Xinjiang

2005-2007

2008-2010

2011-2013

D1

Cluster

D2

Cluster

D3

Cluster

0.083789 0.181130 0.128603 0.100793 0.106559 0.152972

5 4 5 5 5 5

0.082763 0.201443 0.133481 0.098195 0.107876 0.164474

5 4 5 5 5 4

0.091882 0.207039 0.144753 0.096888 0.115589 0.183120

5 4 5 5 5 4

Note. class 0 is extremely significant; class 1 is very significant; class 2 is more significant; class 3 stands for generally significant; class 4 is not significant; class 5 is highly significant.

Results Analysis about the Three Major Areas of China (1) Among the eastern regions, for the 10 provinces (municipalities):Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong and Guangdong, the coupling coordination degree of financial agglomeration and international trade belongs to the generally significant level of the third class during the whole three time periods. It indicates that China's economic development zones and the first batch of experimental zones of the reform and opening up, the eastern regions’ comprehensive development level of financial agglomeration and the international trade is higher.

(2) There only exists one province (the first time period is Hubei province, and the second time period is Henan province) whose coupling coordination degree belongs to the generally significant level during the first and second time periods, while the other 7 provinces’ coupling coordination degree belongs to the insignificant level of the fourth class. However, the situation has very obvious changes during the third time period: the degree of Jiangxi , Anhui, Henan, Hunan and Hubei is up to the generally significant level of the third class. But the situation of Heilongjiang province deteriorates to the extremely insignificant level of the fifth class.

(3) During the first time period, the degree of two thirds of the west regions belongs to the extremely insignificant level. Afterwards, Sichuan province and Chongqing city tend to a better situation: the degree rises up to the generally significant level of the third class.

(4) Generally speaking, the amount ratio of above the generally significant of the third class is respectively, in the three areas, 9:1:0, 10:1:1, 10:5:2; the amount ratio of the fourth and fifth class is, respectively, in the three areas, 2:7:12, 0:7:11, 1:3:10. From the east to the west, the coupling coordination degree of financial agglomeration and international trade presents a "gradient descending" state. By the above quantity analysis, we can clearly see the increasing extent of the coupling coordination degree of the provinces in central China is relatively large. The number of the provinces locating in the west belonging to the fourth and fifth class is decreasing and the coupling coordination of these provinces has a bigger upside potential.

Conclusions and Discussion (1) As for space, the eastern part of China is basically in a coupling coordinate state, except for some provinces like Hainan. The level of financial agglomeration in eastern China is much higher than that in the central and western regions due to the agglomeration of talent, resources, policies and other advantages. Although it’s more open with unique geographical superiority, its import-export trade is facing greater challenges because China is propelling reform, adjusting and upgrading industrial. However, the central and western part is basically coupling detuning.

This shows that the degree of coupling coordinate in economically developed regions is much higher than that in underdeveloped regions.

(2) As for time, coordination of coupling is not immutable. The coupling coordination degree in eastern provinces is good in three periods, while the central region has an obvious rise, especially in Jiangxi, Anhui, Henan, Hunan and Hubei. In spite of the coupled detuning situation in the western region, the overall trend still leads to a higher

62

Frontiers in Finance Volume 1, 2015

www.seipub.org/ff

degree of coupling coordination. The speed of development in Sichuan and Chongqing is very distinct. Yunnan, Xinjiang and Guangxi have greatly improved as well.

(3) In general, coupled coordination of our financial agglomeration and import-export trade is divided into multiple levels. Even the worst type of coupling coordinate (Tibet) has a great prospect. The increase of the degree in the central and western region is obvious while in Gansu, Qinghai, Ningxia and Guizhou it is relatively slow.

Most provinces in the country are financial lagged, indicating that the financial industry of China generally lags behind and the financial support for the import-export trade has yet to be improved.

The globalization of capital flows has broken the concept of nations just like international trade in recent years as the further strengthening of economic globalization. Besides, the relevant degree of financial agglomeration and foreign trade has gradually increased while the overall financial efficiency is not high. Therefore, to facilitate the rapid trade development, we must take comprehensive measures to support the development of the financial industry. This includes supporting the development of financial intermediaries, establishing a sound credit system, enhancing the efficiency of capital allocation, encouraging the development of securities market, regulating market behavior and enhancing the financial industry service levels, optimizing and improving the direct financing approach to efficient allocation of resources. Therefore, to improve the level of financial cluster development, making finance and trade develop coordinated is significant for China’s social and economic transformation.

This article importantly discusses the coupling coordination development between the financial agglomeration and the the import & export trade system, but in considerations of the availability of the data, the article focus on considering the coupling coordination degree of provincial level, and the research on the different cities in the provinces is ignored. Therefore some further analysis need to be discussed.

ACKNOWLEDGMENT

In this paper, the research was sponsored by the National Natural Science Foundation Project (No. 71063015 and No.71263039) and Jiangxi Social Science "Twelve Five" (2015) Project :The Research about the Financial Agglomeration, Economic Growth and Ecological Efficiency of Nanchang and Jiujiang New District.

REFERENCES

[1]

Alan, M, Taylor, Janine, L, F, Wilson. International trade and finance: Complementary in the United Kingdom 1870–1913 and the United States 1920–1930[J]. Journal of International Money and Finance, 2011, (30): 268-288.

[2]

Kojo Menyah, Saban, Nazlioglu, Yemane Wolde-Rufael. Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach[J]. Economic Modeling, 2014, (37): 386-394.

[3]

Jung Hur, Manoj Raj, Yohanes E. Riyanto. Finance and Trade: A Cross-Country Empirical Analysis on the Impact of Financial Development and Asset Tangibility on International Trade[J]. World Development, 2006, (10): 1728-1740.

[4]

Beck, t. “Financial development and international trade: is there a link?” Journal of International Economics, 2007 (57) : 107-131.

[5]

Fisman, r. i. and Love, Financial Development and Growth in the Short and Long Run. National Bureau of Economic Research, 2004.

[6]

Do, QT and Levchenko, a. Trade and Financial Development Paper presented at LACEA: San Jose, Costa Rica, 2004.

[7]

Neng Shen, Fengchao Liu. “Financial factor to our country international trade development in difference “The influence of modern finance and economics, 2006, (7) : 64-68.

[8]

Yaojun Yao.”Financial development scale of export trade and the influence of structure “Journal of finance and economics, science, 2010, (4): 25 to 31.

Yiqing He (1961 -), male, Jiangxi province, professor, doctoral supervisor, research direction: financial engineering; Yiqing He is the head of Finance and Securities Institute in Nanchang university. He has published more than 50 papers in journals of systems engineering theory and practice, Systems Engineering, China Soft Science and so on. He has won two provincial

63

www.seipub.org/ff

Frontiers in Finance Volume 1, 2015

awards. As a key member, Yiqing He chaired or participated in over 5 national and provincial projects, including the 2 National Natural Science Foundation, 3 provincial research. At present, Yiqing He presides 1 National Natural Science Foundation and 3 provincial issues.

Qiong Yang (1992 -), female, Jiangxi province, master, main research direction is: the international finance.

Weihua Xu (1992-), male, Jiangxi province, master, main research direction is: Probability theory and statistics, Financial engineering.

64