Capital Formation and Economic Growth Under the Perspective of Integrating Industrial Capital with Financial Capital

This paper studies how the internal mechanism of capital formation promotes economic growth by employing the neo-classical economic growth model.The result indicates that the appropriate formation of foreign capital,financial capital and real capital is important for economic growth,while the inadequate or excessive formation will damage the economic growth.As long as the process of capital formation and transformation mechanism is dominated by market mechanism,the inappropriate capital will automatically adjust to the appropriate level to promote the economic growth.By using the panel data from 2000 to 2011 in China,the paper also empirically examines the relation between capital formation and economic growth.It is found that the deepening of financial capital and the rate between foreign capital and total capital under the condition of opening economy,as well as the improvement of financial structure and financing structure,has a positive effect on economic growth,but the deepening of real capital and the rate between financial capital and real capital has a negative effect on economic growth.