A Comparative Study On The Relationship Between China's Stock Market And Economic Growth Before And After The Reform Of Non-tradable Shares

After 20 years'development, China's stock market has reached a new level, and has prominent influences to economy, which has drawn broad attention on the relationship between stock market and economic growth. The reform of non-traded shares started on April 29, 2005 greatly changed the frame of the stock market, which brought improved mechanism and higher efficiency to the stock market itself. On such a background, we started our research on the changes that how the stock market influences the economy, using the data before and after the reform.Fist, we introduce the models and analyze the impact that the reform has on the stock market and draw a preliminary conclusion that the reform improves some of the market's functions. After the theoretical analysis, we use quarterly data from two periods, from1999 to 2005 and from 2005 to 2009, to carry on the empirical research on the relationship between stock market and economic growth. The indices we use in the research mainly are rate of capitalization, rate of trading, rate of raising funds, and turnover rate. Through the multi-linear regression analysis, we come to a conclusion that after the reform, the correlation between rate of capitalization and GDP growth rate ,the correlation between the indices of rate of trading, rate of raising funds, and turnover rate which represent the development of stock market and the GDP growth rate turns from minute negative to minute positive. Based on Granger test, we can say that before the reform, no prominent causality exist between the development of stock market and the economic growth. The reform brought healthy changes to the stock market that further promotes the economic growth, but the changes from the stock market are never the main force that boosts economic development. The conclusion is that after the reform of non-traded shares, the stock market begins to have a certain but very limited influence on economic growth.The last part of this thesis suggests some polices base on the research results, including regulating information disclosure, enhancing corporate governance and improving stock related regulations.