During the last quarter of the 20th century, there has been a rapid growth in China. With the policy of economic reform and opening up to the outside world towards the end of 1978, the fast pace of economic growth has continued as a miracle. Average annual growth rate during the period of 1978-2004 has been 9.2% exceeding the planned target of 7%. GDP has increased by 10.3 times as much as that of in 1978. With the development of domestic economy, within a very short period of time China is gradually becoming an open market economy from a closed economy. The average foreign trade growth has been 16.7% and the volume of foreign trade has increased by 56 times. The foreign trade reliance has increased from 9.5% in 1978 to 70% in 2004. This period has seen major changes in the scale and structure of financial systems of many economies throughout the world. This period also witnessed globalization in these economies. There were many dimensions to this process of transformation but a striking characteristic of these changes was increasing importance of stock markets in these economies. Prior to these changes the stock markets in these economies were in infancy and in China the stock market is still very much under-developed.This study compares the case of China with other economies and finds that financial system plays an important role in the economic growth. This study further finds that thus far the economic growth in China has been lead by banking sector. To further the fast paced economic growth and maintain what China has achieved in its economic growth, it is very important to develop a well functioning market driven financial system such as an efficient stock market.