Empirical Analysis Of Chinese Inter-regional Capital Mobility And Liquidity Efficiency (1979-2004)

With the development of the external economy, the immaturities in financialsystem make Chinese economy become more and more vulnerable. One of thepotential drawbacks is the possibility of regional segmentation of its capital marketwhich may have prevented capital and savings from being used in the most efficientareas. However, this problem has not received any formal investigation. This thesisaims to make further contribution on the base of other researches. Firstly, it studies thedegree of internal capital market segmentation across Chinese provinces by applyingFH test from the international finance literature. Secondly, it uses the multi-variablelinear regression to examine the efficiency of the capital mobility in China. The resultdescribes a picture that: capital mobility within China is low! The whole market heretends to reallocate capital from more productive regions to less productive ones.Finally, it is expected that this thesis would give some suggestions on national andregional policies.