Social Sciences in China (Chinese Edition)

No. 5, 2023

The Chinese Path to Modernization from a Financial Perspective

(Abstract)

He Dexu and Zhang Xuelan

Finance lies at the heart of the modern economy, related as it is to development and security. On the basis of analyzing the mechanism of the logic of financial support for the Chinese path to modernization, this paper discusses the intellectual roots of the symbiosis and co-prosperity of finance and the economy from the perspective of systematic circulation; explains how financial reform can reduce information asymmetry and transaction costs, effectively alleviate financing constraints, promote optimal resource allocation, and prevent and resolve financial risks through institutional innovation; and describes the coordination of financial development and financial security with appropriate government intervention and institutional constraints to curb the macro-financial endogenous instability and structural arbitrage opportunities in the course of reform and the construction of a financial security barrier for Chinese modernization with the strategy of “Yu the Great-style improvement,” characterized by balanced internal and external financial security as well as incentive compatibility, so as to provide some experience and insights for understanding and promoting the Chinese path to modernization.