This paper constructs financial conditions index（FCI）in China based on Dirichlet component analysis method. Test results shows that，the index can not only effectively reflect the running status of money market in China，but also show strong predictive ability on CPI and GDP as a leading indicator of FCI，and it is a suitable reference index of monetary policy. In order to maintain its stable state of inertia，we use infinite state Markov model to measure China’s financial status index. The results show that the overall inertia of China’s financial condition index remains firm in the long-term. Although there are three times of short-term fluctuations because of the monetary policy shifts and the impact of the financial crisis to FCI，China’s financial condition shows a high level of inertia in the first half of 2002，at the end of 2007 and the end of 2009.