To Solve The Liquidity Problems Of China's Stock Market Strategies And Mode Selection

Common share market fluidity, a topic with tons of foreign scholars' works, has been an emerging field for Chinese mainland scholars over the past two years. Chinese common share market, as an emerging and transit market, was born with some defects. Those defects, typically no fluidity for state owned shares and legal person's shares, which compose more than half of the common share market, improper corporate governance, excessive rights of controlling shareholders, have become great obstacles in future development of common share market.The author intends to demonstrate current problems in respect of market fluidity among Chinese common shares market and find a workable approach to resolve them.First, problems of market fluidity. In the first part, after an intensive introduction of world's scholars' opinions on this issue, the author concludes that the four approaches introduced by Mr. Kyle, depth, width, resiliency and immediacy, are applicable to Chinese common share market. But the author points out that the four approaches must be adapted according to the market structure of Chinese common share market. Finally, the author emphasized the importance of market fluidity, a vital characteristics of financial instruments, in common share market.Second, problems of market fluidity in China. This part composes four sections. Relying on extensive statistics, the first section demonstrates that China's common share market has gain great achievements ever since its birth. In the second section, the author holds that the high exchange rate in China common market does not mean that high market fluidity, which instead has posed a great systematic risk on investors. On one hand the three fears have been reasons why 2/3 of common shares in China are lack of fluidity. On the other hand, investors' behavior, transaction cost and information disclosure, transaction rules, and share derivatives, have contributed tothe effect of market fluidity. Finally, the author concludes that lack of fluidity in common share market has undermined the effect of resources allocation by market economy and posed a great systematic risk to common share market.Third, strategy and mode to market fluidity. The author offered her own view in curing the defects of market fluidity in China common share market. She holds that there are two ways to resolve the problem. One is to liberilize state owned shares and legal person shares, the other is to strengthen the construction of market and to provide a convenient, secure, efficient exchanging environment. When discussing the first respect, the author proposed three principles( respect of history, fairness, efficiency), two issues(mode of liberalizing the non-fluidity shares, and mode of setting price ), six approaches. In the second respect, the author holds that market fluidity must be improved greatly in a mature market.