The Impact of Financial Openness on Economic Growth - A Case Study of China’s Beijing-Tianjin-Hebei Region

Abstract

This paper first uses a Principal Component Analysis (PCA) to determine both the comprehensive index of financial openness and financial development in the Beijing-Tianjin-Hebei(BTH) region, then discusses the impact of financial openness and financial development on economic growth with a threshold regression model from a regional perspective with a data from 2000-2020. The results indicate that the financial market scale in Beijing from 2000-2014 and in Tianjin from 2000-2001 is not sufficient to support the financial openness, so the financial openness in this period hurts the development of the region's economy; the financial market scale in Tianjin from 2008-2020 and in Hebei from 2000-2020 too inflated compared to the lower level of financial openness, which is also unfavorable to economic growth in this region. On the another hand, with the level of financial openness in Beijing from 2006-2018 and in Tianjin from 2013-2020, the development of transaction volume in the financial market has reached an optimal level to promote the economic development of the region.