China A-share Market Equity Flows Divided

From the viewpoint of the difference of share liquidity, this article tries to reveal the segmentation of share liquidity in the China stock market, and stresses on analyzing the system arrangement of share liquidity, rent-seeking system, investor behavior model, the origin of different pricing system and the duality structure of market management. It also brings us some possible solutions for the current situation.By analyzing the birth and evolution of the China stock market, we can find that the market appears a clear characteristic of government promotion growth. The separate share structure is the origin of the segmentation of share liquidity, trading and management system in the China stock market. As a government's system arrangement, the segmentation of share liquidity helps the government control the supply of stock market, so that the government can not only retain control on the listing companies, but realize the purpose of raising fund at a higher IPO price of stocks as well.Under the segmentation of share liquidity , the main shareholder and other investors are maximizing their benefits in different ways. Main shareholders usually maximize their benefits through relating trades, share refinance, and obtain guarantee loans from the list company, etc. However, the only method, which the other investors can maximize their benefits, is to speculate on short-term investment returns.There is a dual pricing system in the China stock market. It brings the market both a dual IPO pricing system and a dual share trading system. Liquidity Model and Differential Valuation Model have been used to analyze the price premium between liquid shares and "illiquid" shares.The China stock market is managed by two departments, which are the state-owned Assets Supervision and Administration Commission of the State Council and the China Securities Regulation Commission. Through analyzing the resource reallocation rent-seeking model between the two divisions under one headquarter, the article points out some possible problems that may happen when the "illiquid" shares go to the public.Finally, the article presents a solution for the segmentation of share liquidity structure, which is "illiquid" shares should go to public at the market price after beingcompressed on the rules of historical cost reverting, "justice, open, equity" and the "same stock, same right".