A Correlation Research On The Development Of Stock Market And Economy In China

The stock market of China has been developed for about twenty years, and it has a large scale now. Unitl 2007,the investors accounts amounted to 138.87 million, with a total market value of about 32714 billion yuan, the circulation market value of 9306 billion yuan, the total share capital of 2241 billion yuan, the amount of fund-raising gets to 108 billion yuan, turnover of 2907 billion yuan , and is the world's third largest stock market. The debate about the development of stock marked and economy development is very severely. Some scholars believe that china's stock market is getting out of the restraintion of "policy controlled market" and developing well, other scholars believe that in china's stock market exists irrational prosperity, if it isn't checked well, it would affect the real economy. The aim of this paper is to find out the relationship between the development of stock market and economy , and to see whether the development of stock market would affect the real economy.On the base of summarizing the theoretical studies on the relationship between stock market and economic growth , this paper analyse the development of stock market in China ,then introduce the basic function of stock market. For the stock market has its own function, in this paper, we generalize five functions: 1,provide liquidity;2,disperse risk;3,get company's information; 4,improve the control of the company;5,mobilizing savings. Then analyse the channels through which stock market and economy affect each other. At last, combine the theories research above, we take the development of stock market and economy in china as an example to make positive analysis and give some suggests to develop china's stock market.This paper uses vector autoregression (VAR) model to analysis the relationship between China's stock market and economic development. Accounting the numbers that we can get, we choose some indexes to describe the development of china's stock market and economy, and the result is the development rate of GDP—GY has a relationship with the development of economy. But through Bivariate Granger Causal Relation Test , we can't find the linkage between them .So we can't use the mainstream theories to explain the relationship between stock market and economic development in China. China's stock market has very weak function to the development of economy. On the base of this result, this paper give three suggest to develop china's stock:1,to perfect the main part of the market; 2,to establish a strict mechanism to withdraw from the stock market; 3,to step up monitoring.