The compatibility between financial system and real economy

This study quantitatively assesses the financial system's efficiency and investigates its compatibility with the real economy in China over the period 2010 to 2023. The findings indicate a consistent decline in the efficiency of China's financial system since 2010, underscoring a reduction in efficacy and inadequate support for the real economy. Moreover, the alignment of China's financial system with the real economy remains at a nascent stage. Elevating the share of direct financing and expanding the financial sector can currently foster the real economy's growth. However, improvements in financial efficiency might reduce the real economic output. Enhancing the financial system's capacity to bolster the real economy requires heightened focus on capital market development, prudent expansion of financial scale, and robust financial regulation.