Study On Us Financial Crisis Impact On China Stock Market And Related Countermeasures

With fast development of Chinese economy and deepening of socialist market economy, Chinese capital market has made a rapid progress since 1990s. Stock market has played a more and more important part in Chinese economy and has contributed a lot to the construction of socialist market economy, reform of enterprise system and expansion of financing channels for enterprises. Unfortunately, the Financial Crisis in USA which resulted from Sub-prime Crisis broke out in early 2007, it has also brought huge impact on Chinese stock market. The total loses in the stock exchanges of Shanghai and Shenzhen come to over 70% respectively. Therefore, it is of vital importance for China to put forward countermeasure to minimize the loses during the economic crisis while at the same time to keep a stable development of its stock markets.Under the circumstances of America Financial Crisis, this paper, through normative analysis and empirical study, conducts a systematic study of the impact and the mechanism on Chinese stock market brought by America Financial Crisis. This essay consists of five parts, of which the first part is an introduction. It states briefly the background, the significance of the subject, the research method to be used, the review of the related studies and theories, and the innovative points in this paper. It draws a conclusion of the analysis and the theories concerning the effects of the financial crisis and lays a foundation for the following parts. The second part briefly introduces the causes, development and the present situation of the crisis. The third part analyzes the effects of American Financial Crisis on Chinese stock market from such three aspects as the entity economy, the international capital flow and the international markets transmission. The forth part is an empirical study of the effect of the crisis on Chinese stock market, which is used to verify the correctness of the above theoretic analysis of the effects and to reveal the lessons china can learn. The fifth part, combining the above mentioned analysis and the real conditions of China, puts forward several countermeasures to minimize the impact.The findings of the study show that American Financial Crisis has an impact on Chinese stock market in the following three aspects. The first is the sector of the entity economy. Due to the crisis, the global market declines and Chinese export volume diminishes. As a result, the entity economy, including employment, consumption and investment, suffers a lot; and the stock market, which acts as a barometer of the macro economy, is affected negatively. Secondly, the short term capital flows are affected. The crisis will first influences the inflow and outflow of foreign capital in China, and then further affect the Chinese stock markets by disturbing the capital supply and the psychological expectations of the market participants. The international market transmission is the third part. Since there is a certain connection between Chinese stock market,Hong Kong stock market and American stock market, the crisis has surely an indirect impact on Chinese stock market when affecting directly American stock market.According to the above analysis, this essay sets forth the following countermeasures to weaken the crisis:As to the entity economy, China should keep a stable growth rate of export, meanwhile it ought to optimize the export structure, transform the ways of exportation growth and improve the quality and efficiency of the growth of exportation. Secondly, China should try to expand domestic demand and keep steady economic growth. Thirdly, China should quicken the shifting of the ways of economic growth and maintain the economic security.Regarding the international capital flows, the authority concerned should firstly reinforce the management of the capital projects, so as to block the channels for international capital flowing. Then it should keep a sound development of economy and prevent a bubble economy. Thirdly, it should strengthen the supervision of the inflows and outflows of the international capital. Fourthly, a formation mechanism for a better exchange rate of RMB should be perfected, so as to expand the floating range of the exchange rate of RMB. Fifthly, it should enhance the international cooperation to keep away the risks of cross-boundary capital flows.Concerning the international markets transmission, China should firstly construct a multi-level market structure system for its stock markets. Then China should try its utmost to develop institutional investors, so as to keep investors' confidence and to improve their qualities. Thirdly, China should speed up the development of its financial market, build up a multi-level financial system and construct a financial derivatives market with a focus on the futures market and option market progressively and orderly.