Recent years, the China economic is vast growing. Is day by day close along with Taiwan and mainland China’s trade relation, the stock market should also have the suitable degree gearing influence. The purpose of this research is to study the relationship between Taiwan’s and China’s stock markets. This study makes use of the measures of unit root, Cointegration, Granger’s causality test, VAR model and Impulse Response to find out the relations between Taiwan stock market and China stock markets. Research of period this research for this research period from June 1, 2004 stopped to June 30, 2007, the material state for date material altogether 5648, we get the results as following: First, Taiwan stock market and China stock market between no evident cointegration . Second, the Granger’s causality test reveals that Hong Kong stock market lead Taiwan’s and China’s stock markets. Third, the impulse response function reveals that Hong Kong stock market has stronger effect on Taiwan’s and China’s stock markets.
