Abstract: The release of factor vitality, especially the rapid expansion of capital, is a key factor promoting the rapid growth of China′s economy, while clarifying the intrinsic relationship between capital expansion and economic growth is the key to having a deep understanding of China′s economic development path. By the decomposition and calculation of the segmentation degree of China′s capital market, the economic growth effect of capital expansion is examined by the panel data of 31 provinces (municipalities) in China. The results show that: after a long period of development, the segmentation trend of China′s capital market still exists and is even expanding; the capital market improvement and capital expansion are not in synchronization, and the exogenous characteristic of capital expansion and economic growth is obvious; there is an inverted U curve relationship between capital market segmentation and economic growth, and when the economy reaches a certain height, the continuous segmented capital market will restrain the economic growth; in the long run, the sustainable economic growth and the orderly capital expansion need a sound, unified, and perfect capital market, and the further reform direction is the deep reform of capital market.

Key words: capital market, capital expansion, economic growth, market segmentation