Abstract: By making use of China’s provincial panel data, this paper makes an analysis of the relationship between government intervention, financial development and economic growth. The findings indicate that a moderate scale of financial development can promote economic growth, and that at the intermediate level of financial development the economic growth effect of financial development is the maximum. In the areas with lower level of financial development, the moderate intervention of local government is conducive to the promotion of economic growth; while in the areas with higher level of financial development, there is a negative correlation between local government intervention in financial development and economic growth. The impact of local government intervention in finance on economic growth presents the characteristics of diminishing marginal efficiency. Therefore, government intervention in financial development should not be mandatory intervention such as the intervention in micro behaviors or administrative interventions. The intervention should be based on the respect for the laws of the market, so as to improve the level of public services in finance, reduce the degree of information asymmetry and transaction costs, and guide the financial services to the real economy.

Key words: government intervention; local financial development; economic growth; government work report