Abstract: This study matched stocks into pairs with a measure of minimum price distance, and based on this matching rule, it tested the pairs trading strategy with daily data over 2006-2009 in Chinese market. Empirical results show that the pairs trading strategy yields average 1% monthly return, and these returns are unrelated to market conditions, which demonstrates that this pairs trading strategy can get a stable profit and is market-neutral in Chinese market. The pair which has bigger price distance also has a higher average spread threshold to trigger opening transaction in pairs trading. However, as to the time converging to spread threshold which triggers closing transaction, all of them take no more than 23 days regardless of price distance, which indicates that this pair trading strategy in Chinese market is a short-term investment strategy.