Abstract: Whether the financial openness can provide new driving force for China′s technological progress is a realistic problem that China is facing in the process of opening to the outside world.On the basis of theoretical analysis, this paper uses cross-border panel data from 1998 to 2017 to empirically test the mechanism of financial openness affecting technological progress by using 2SLS, mediating effect and threshold effect models.The results show that, on the one hand, the financial openness of the later-developing countries leads to technological progress by strengthening the technology spillover of capital; on the other hand, it forces technological progress by increasing the labor factor price;under the background of financial openness, the technological catch-up process of later-developing countries can be divided into “I” (large gap) and “II” (small gap) stages according to the threshold of the gap between them and the world′s leading technologies,and the technological progress effect of financial openness in stage I is mainly dominated by technology spillover effect, but the technological progress effect of “stage II” financial openness is dominated by price backpressure effect.This means that in current stage of development, on the one hand, China should continue to expand the level of financial openness, and on the other hand, it should focus on eliminating the price distortions of various labor factors, so as to strengthen the momentum of technological progress caused by financial openness.

Key words: financial openness, technological progress, technological catch-up, later-developing country, labor factor price