An Analysis Of Systematic Risk In Chinese Capital Market

Capital market is full of risks. The risks of capital market include individual risk and systematic risk which will cause losses to all investors. The heavy systematic risk is the remarkable characteristic of Chinese capital market. This paper analyzed present situation and origins of systematic risk of capital market in China in order to found out precautionary measures to prevent and decrease the risk.It showed that the systematic risk of Chinese capital market has been in high level, and mainly comes from stock market. Its potential hazards to economic development and economic reform are increasing with expanding of capital market. The heavy systematic risk is also a potential factor in finance crisis. It is a veryimportant problem to reduce systematic risk to ensure steady develop of capitalmarket and economy.This paper analyzed the general origin and the system origin by theoretic research and realistic research to reveal the mechanism of systematic risk in Chinese capital market. The major conclusions are as following: the macro-economy cyclic is an important factor in systematic risk of Chinese capital market, but the system root of this risk is the low-efficiency of Chinese capital market in resources location because of the government administration control and intervention and the government recessive guarantee to the capital market. The capital market was used by government to help the state-owned enterprise transformed their operation system and collect money, which leaded to the low-efficiency of governance in the listed company. So the company operation risk turns tosystematic risk of capital market. Government's monopoly of capital market also leaded to the "shell" value of listed company which is irrelative to the company's invest value, which made the higher general price in the market. In addition to, the structure of investors which is consisting of many individual investors and few institution investors lets it easy to manipulate the stock market for the institution investors.According to the origins of the systematic risk, it is necessary to improve the market mechanism and market efficiency to eliminate the system root of the risk to decrease the risks. First, it can be do by adjusting the capital market structure, which required to solving several important problems such as the reducing of state-owned shares, the circulation of total shares, the merge of A shares market and B shares market, and the opening of capital market. Second, we must improve the issues system and companies' governance to remove the hidden peril at quality of listed companies. Finally, the government should improve the capital market regulation system and cancel the recessive guarantee to the capital market. In addition, the innovation of capital instruments is also needed to provide some risk management tools and methods for investors. Now it is practicable to develop the stock index futures in Chinese capital market. This paper provides a tentative program for it including producing united stock index, leading into short selling system and a preliminary design for the future contract.