The Influence of the Quality of the Institutional Environment on the Development of Real and Financial Sectors of the Chinese Economy

Abstract

The article examines the impact of the quality of the institutional environment on the development of the real and financial sectors of the economy. To assess the formation of the institutional environment, a set of qualitative and quantitative indicators was used. As indicators for assessing the development of the financial sector, it is proposed to use indicators of financial depth. Based on the use of correlation analysis tools, correlations between indicators of financial depth and indicators for assessing the formation of the institutional environment were identified. Based on the identified most significant correlations, taking into account institutional factors, diagnostic models were constructed, the use of which allowed us to build three forecast scenarios for changes in the financial depth of the Chinese financial system for the period up to 2030: optimistic, optimistic and basic. Arguments are presented that prove the weakness of the institutional environment of the Chinese economy, not only in comparison with the most developed economies, but also in emerging markets due to the preservation of certain characteristics of the transition economy, which hinders the development of the financial sector and market mechanisms. It is revealed that in the short term, further expansion of state participation in the Chinese financial market in a weak institutional environment may have a positive effect, but in the long term, an increase in state presence may become an obstacle to institutional development. Testing of the proposed tools of correlation analysis on the materials of the United States showed that indicators of the financial depth of the financial systems of developed countries with a high level of development of institutions have much weaker correlations with indicators of the formation of the institutional environment than in countries with emerging markets characterized by low quality of institutions.