How China's economic reforms will affect trends in the domestic stock market: Evidence from the Shenzhen stock market

Abstract

This research discusses the impact on the trading volume of the Shenzhen Stock Market under United States Monetary Supply Japanese Monetary Supply Chinese Fiscal and Monetary Policy and recent events in China It also investigates whether the Chinese Fiscal and Monetary policy Quantitative easing or Abenomics are the factors that influence the trading volume of the Shenzhen stock market In this study ordinary least squares is used for the regression analysis The dependent variable is the daily trading volume of the Shenzhen Stock Exchange The independent variables are government revenue government spending exchange rate benchmark one - year loan rate required deposit reserve ratio Chinese money supply M2 U S money supply M2 Japanese money supply M2 and the Shanghai Interbank Offered Rate The dummy variables which are policy for limitation in stock investment China Pilot Free Trade Zone initial public offerings and the 3rd Plenary Session of the 18th CPC Central Committee It was found that the exchange rates the monetary policy and the Shanghai Interbank Offered Rate have significant negative impacts on trading volume The findings explain why during the cash crunch on China’s money storage misuse of funds caused insufficient liquidity in the market fund Therefore even though the government increased the monetary supply it still could not stimulate the stock market efficiently The planning on government taxes and the China (Shanghai) Pilot Free Trade Zone have been found to have a positive impact on trading volume which means that as long as there are reformations on tax policies this may attract more enterprises and foreigners to invest in China The China (Shanghai) Pilot Free Trade Zone has not only increased the development in nearby districts and other free trade zones but also has generated international trade and attracted foreign investment The monetary supply from the U S and Japan have been found to have a positive effect on the trading volume in China (PRC) but not at a significant level The economic indication is that regardless of whether the no matter there are increasing or decreasing in the future QE or Abenomics there it will be would hard difficult to affect the economic structure of China (PRC)

Date of Award	2014 Jul 26
Original language	English
Supervisor	Hsin-Hong Kang (Supervisor)