Abstract: A new model of the dynamic optimal capital structure in China based on the "five forces" model of finance has been established. This model indicates that the decisive factor of dynamic capital structure is the optimization of financial risking (value dissipation). Those firms who have the dynamic optimal capital structure embody financial strategy advantaged including more cumulative growth rates of net profit, total asset and NCF in the meantime even they only have the same growth rate of turnover as the market. Moreover, firm value is negative relationship with the capital structure when firm in dynamic optimal capital structure. This can explain why most of the leadership firms choose a lower capital structure long-term. The model of the dynamic optimal capital structure is tested by"debt with interest/investment capital" between 24% and 40%, among them 30% is the best one by the 998 listed companies in Stock Market A in China from 2002 to 2011. This paper also indicates that most of these listed companies cannot choose their optimal capital structure,and which will reduce their market values.

Key words: capital structure, financial risking, value dissipation, dynamic optimal