Chinese Capital Market Efficiency

Capital market has always been regarded as the "weatherglass" of macro economy. On one hand it illustrates the close relation between capital market and macro economy; on the other hand, it illustrates the important role of capital market in resource allocation. After more than a hundred years' development, capital markets in western developed countries are mature in every aspect such as supervising system, investor accomplishment, etc. As a major part of financial system, capital market plays an important role in the startup and development of economy of many developed countries. However, in bourgeoning developing countries and countries in transition, swiftly developing capital markets often deviate from the basis of economy, and are not able to fulfill the function of those in developed countries; many capital markets are full of idle funds from home and abroad seeking profits, which accelerate the fluctuation and crisis of economy.After more than ten years of development, Chinese capital market have already reached a sizable scale, and have provided substantive funds for state-owned enterprises, but the efficiency of the use of relevant funds causes a lot of disputation owning to the exterior environment, which is lack of credit and perfect legal system, and the quality of the listed company on the stock exchange. In theoretical circles, analysis on Chinese capital market and economic development also reflects the deviation of capital market from national economy. Therefore, it is necessary to make a through research on the efficiency of Chinese capital market in economic analytical approach, using the outcome and experience of overseas research for reference.The theory on efficiency of capital market derives from the theory of economic efficiency, in this field many researches both theoretical and empirical have been done, and numerous literatures have come into being. With the development of Chinese capital market, more and more relevant literatures appeared, but many of them considered only part of it, never from a developmental, macro and dynamic point of view. Along with admittance of China into WTO and the steady and healthydevelopment of national economy, capital market will maintain its unique function in the formation of market economy and the completion of resource allocation system in Chinese economic transition. It is important not only for the reform of system of investment and financing and banking system, but also for the reform of enterprise system (including the reform of state-owned enterprise) and the establishment of modern corporation.Therefore, what is the general efficiency of Chinese capital market? What is the relation between Chinese capital market and resource allocation? What is the interactive mechanism between capital market and economic development? What is the efficiency of Chinese capital market in different layers? What are the effects caused by Chinese capital market on efficiency in different aspects? To enhance the efficiency of Chinese capital market, what measures should we take? This series of questions has more necessitous and realistic meaning for such a big, swiftly developing country in economic transition as China. There should be systematic and explicit answers to these realistic questions, and this is one of the start points of the paper. Moreover, hitherto the theoretical framework on efficiency of capital market is rather loose, and it is not a systematic one, so the paper tries to probe into above problems. This is another important starting point. Hence, the research on efficiency not only enriches and completes the theoretical system on efficiency of capital market, but also has very important realistic meanings for the swift development of financial market, especially capital market, for the reform of state-owned enterprise, and for promoting efficiency of resource allocation and economic development through capital market.The paper is based on relevant theoretical and empirical literature, and focuses on the theoretical analysis on effic...