Abstract:

From the perspective of contract enforcement and financial conversion, we can find that China's financial deepening is suffering from the lack of trust and high cost of financial conversion. The two indices, θ and Ψ, show that there are still some disadvantages in China's financial deepening, which have led to the loss of national welfare, the inefficiency of economic growth and conversion between savings and investment, etc.. The process of China's financial deepening will be accelerated if contract enforcement is promoted by institutional construction and financial conversion cost is cut down by financial innovation.

Key words: financial deepening, lack of trust, financial conversion, institutional construction, financial innovation