On Chinese Capital Market Integration With The World

It has been known for the importance of the capital market on economic development in general. In the late 20 years, it's hot point for the capital market integration in the discussion. However, the result is inconclusive. The scholars in favor of the integration provide the evidence from the efficiency loss of the capital control, not only from the macroeconomic side but from the microeconomic side. Those going against it seek the evidence from the frailty in the financial system of the emerging market(EMs) countries and their financial crises after the lifting of the capital control. This paper addresses the necessity and urgency of the early opening of Chinese capital stock market, and provide the opening steps and the strategies keeping from the financial risks, according to the status quo and the characters of Chinese capital market development, the debate of the Renmingbi appreciation, the large surplus of the current account, the theoretical literature of the capital market integration and the opening experiences of the emerging markets.This paper holds that the formation of the international capital enhances the allocation of the financial resources, cutting short the capital cost of companies especially for the small companies, sharing the county-specific risk and the industry-specific risk for the investors, increasing the profit probability. The speculators sometime may be helpful to offset the volatility of the price. The stock market in EMs countries is not unique of the volability. The net capital inflows to the EMs has the trend of decrease. The segmentation of the capital market exists among the provinces , the regions in China and between the domestic and foreign inventors in China. Furthermore, the capital flight is serious. This paper advances as follows: China should improve the legal system for protecting the small investors and the corporation governance in the context of WTO. we will restructure the share rights segmentation carefully. We should encourage the capital outflow besides the capital inflow because it can provide the way out for the surplus capital on one hand and relieve the pressure of the Renmingbi appreciation on the other hand. The home supervision and internaitona cooperation should be enhanced for the financial risks. However, thedomestic reform is necessary but not sufficient for the integration. Earlier opening the capital market will make GDP grow faster and convergent to the stable approach quickly. It will increase the investors' belief for Chinese capital market and hence number of the investors . The active construction of Shanghai international financial centre will increase the fiancial strength and status for China.