Function of Money Market and Capital Market

The development of both Money market and Capital market has been active in fostering its economic advancement which overshadowed the growth of its monetary market. In the course of the past fifteen years reforms have bolstered the capital market’s importance within the framework of overall economic reform. Initially development emphasized mobilization of available financial resources through government securities to resolve the central government deficit. The bond market evolved into an essential instrument of financial discipline illustrating the degree of government dependence on this market. .As the market advanced, the government securities market started transforming to more of a true market, although it was still heavily regulated. This transformation marks a slow shift to a market driven economy. The evolution of the capital market of China illustrates the difficulties encountered in the shift from a command economy to a market economy. The attempts of the government to control it and at the same time loosen its grip were most responsible for the development of the economy.