Stock market liberalization is a decision to allow foreign investors to purchase domestic shares. This paper is an event study on market reactions around the announcement of the Qualified Foreign Institutional Investors (QFII) scheme in China. We find no significant abnormal returns in market indices in the short-term period leading up to the announcement, negative abnormal returns in the short-term period following the announcement, and no significant abnormal returns in the long-term period thereafter. The findings do not comply with the prediction of international asset pricing models. The QFII scheme may not help much in reducing the cost of equity capital and risk premium of China companies.