Abstract: Based on the theoretical analysis of the financialization's impact on urbanization mechanism, a spatial econometric model is established by using the panel data of China's provinces and the method of decomposition of direct and indirect effects to explore the financialization's impact on urbanization and its characteristics in a region and its adjacent areas. It is found that the impact of financialization on urbanization in the region has the characteristics of inverse "U" type. When the level of financialization does not reach the top of the "U" curve, the impact of the financialization on urbanization in the region is significantly positive. When the level of financialization reaches the top of the "U" curve, its negative effect will begin to show. But it is worth noting that though the non-linear features are not obvious, there is a significant linear negative relationship in financialization's impact on urbanization in neighboring regions, which will restrict the development of urbanization. In addition, the impact of two control variables—industrialization and agricultural human capital—on the urbanization of the region and neighboring regions is significantly positive.

Key words: financialization, urbanization, spatial econometric analysis, direct effects, indirect effects