This paper examines the effects of government intervention and political connections on cost of equity capital in China by using a sample of 334 Ashare listed companies launching share placement during the period of 1999~2001. We find out that there is significant negative influence of government intervention on the cost of equity of stateowned enterprises. For the stateowned sample,there is no significant relationship between political connections and cost of equity. However, for the subsample with higher governmental intervention, political connections significantly increase the cost of equity. Moreover, for the non-state sample, political connections also have negative impact on the cost of equity. These results suggest political connections bring even greater risks to the majority of companies.