Docking Study Of China's Money Market And Capital Market

The linkage between the money market and the capital market has been a heated topic among professionals in China(?) economic field. It includes, in specific, the linkage of capital, the linkage of tools, the linkage of institutes and the linkage of governance. While they are quite different, the two sub-markets of the financial market have an inherent relation. The question is: should they be isolated or connected? This thesis starts from examing the conceptual differences and relations between money market and capital market. Then the author explains the financial markets linkage theories and reviews the evolution in linkage systems. On one hand, the author analyses in specific the situation of isolated markets and the negative consequences caused by legislative restrictions and markets arrangements. The phenomenon in China is particularly stressed, ie, the bank capitals flow illegally into the stock market causing a series of risks. On the other hand, the author reviews the starting stage of China in linkage between money market and capital market and the process of linkage between the two markets in the west, and puts forward some suggestions. The author holds the view that the linkage between the two markets is significant but should be under a fundamental principle: commercial banks, as subjects of the money market, can only be liquidity provider, not investing subjects in the capital market. We should prevent the capital market from being another credit creating system for commercial banks. Under the above principle, we should perfect our fundamental works to link the markets through funds exchanges, to link the tools through innovations, to link the institutes and governance through constructing new organizations. Thus raise the competence and efficiency of China(?)financial system.