The Impact of Financial Development on Manufacturing Structural Upgrading: Quantity or Quality

Financial development plays a promotive role in improving capital allocation effect of industrial sectors, promoting new industrial technologies and choosing leading industries. Studying the relationship between financial development and structural upgrading of the manufacturing industry in the transition period of “high-quality development of manufacturing industry in China” is meaningful and important. To achieve high-quality development, we must simultaneously improve the efficiency of capital allocation and technological innovation, both of which need the support and the promotion of financial development. This paper systematically analyzes the impact mechanism of financial development on the upgrading of manufacturing industry structure. Based on the panel data of 121 cities with active industries in China from 2006 to 2018, the impact of financial development on the upgrading of manufacturing industry structure is studied from three aspects: financial scale, financial efficiency and financial agglomeration degree. The empirical results show that there is a positive correlation between financial efficiency and structural upgrading of manufacturing industry, and a negative correlation between financial scale or financial agglomeration and structural upgrading. Further analysis shows that financial development has an effect on manufacturing industry structural upgrading effectively. However, this effect is mainly driven by the development of “quality” of the financial industry, while the development of “quantity” plays a reverse inhibitory role.