LAUSR

Essentially, financial development is a continuous and time-varying process. This paper explicitly accounts for this by introducing functional data analysis to convert discrete observations into a smooth curve in order to represent the continuous process of financial development at the regional level. Regional disparities in financial development in China are reexamined from three dimensions: financial scale enlargement, financial structure adjustment, and financial intermediary efficiency. Disparities are then decomposed using an extended functional Theil index. It is necessary to introduce functional data into the research of financial development level. Through the functional research of China’s financial development level index of three different dimensions, the financial development level can be studied at the level of speed and acceleration, which fills up the research gap. The results imply that (1) the disparity in the level of financial scale enlargement and disparity in velocity and acceleration of financial intermediary efficiency are both statistically significant across regions, while the regional disparity in financial structure adjustment is insignificant, and (2) the downward trends of the total disparity in three dimensions are all dominated by the declining intraregional disparities. Since all 31 provinces have broken the traditional regional division, China does not need to implement region-specific protective policies in strengthening its deepening financial reforms.