A retrospect and prospect on the development of China's stock market

The purpose of this research is to investigate the development and performances of the Chinese stock markets and the relationship between China's stock market development and economic growth. In theoretical discussions, we review some previous studies about the relationship between financial development and economic growth, then highlight the role of stock markets in economic activity, illustrate channels that have been identified by the theoretical research through which stock markets can influence economic growth, and finally summarize the previous empirical evidence. Following this, we focus on the development course of China's stock market, analyze its characteristics, and discuss the problems caused by the market's system flaws. In empirical analysis, we investigate actual performance of the Chinese stock markets, using the time series analysis techniques, and discuss particularly the relationship between stock market development and economic growth. The empirical results are consistent with our theoretical discussions that a policy-oriented stock market is less efficient and is, to a certain extent, unlikely to produce a significant and positive effect on economic growth. Given that one of the most important barriers to the development of China's stock market might be administrative interference of the government, this study finally addresses some corrective policy changes which may exert positive influence on the future development of China's stock market. --P. ii.