Capital Flight In Developing Countries

Since 1990's,there have burst out many financial crises in the world, such as European Monetary Union crisis, Mexico crisis, South-East Asia crisis, Russia crisis and Brazil crisis, which were closely related with capital flight. As a capital controlled country, China has had also a great deal of capital flight since 1990. Although no financial crisis has ever occurred in China, the issue of capital flight will be a hidden trouble in the future development of economy. Under economic globalization, China must draw a lesson from other countries to prevent financial crisis. It is not only an important theoretic issue, but also a crucial pragmatic problem.Because of its complexity and concealment and the different points of view on the issue, there still exists no general accepted definition of capital flight in academic community. This dissertation presents a new definition as follows: capital flight is an abnormal capital flow which results from investors'fear of abnormal risk within their own country, the practice of avoiding capital control of the domestic authorities and taking illegal or feigned legal measures to transfer capital across the border.The prerequisite of this research is to evaluate the scale of capital flight. The evaluation of scale matches the definition of capital flight. Different definitions produce different evaluation models. In accordance with actual conditions of China, this dissertation modifies the related evaluation models on the basis of comparing three main methods for evaluating capital flight, namely direct evaluation, indirect evaluation and mixed evaluation. According to modified model, the dissertation estimates the scale of capital flight of China. And by comparing the volume with that of Mexico, Russia and Korea, which were at serious situation of capital flight in the past, it is discovered that the proportion of...