Distribution Of The International Capital Flow Benefits In The Course Of Financial Globalization

Since 1980s, the step of financial globalization, trends promoted by countries, international organizations, multinational corporations, multinational banks and institutional investors has gone fast. The main character and form of financial globalization is international capital flows. The global-based production and trade conducted by multinational corporations, the trend of financial liberation and advance of information technology supplied power and basic condition for international capital flows. In the process of financial globalization, international capital flows increased rapidly in respect of contents, structure, volume and speed. As international capital flows can bring much return to investor/home country and necessary resources to borrower/host country i.e. bring benefits to both party, the process of international capital flows is also the process of production and distribution of benefits.In the process of international capital flows, the distribution of benefits is effected between developed countries (that mainly as home countries) and developing countries (that mainly as host countries). The distributions of benefits respectively produced in Foreign Direct Investment (FDI), International Portfolio Investments and International Loan are differentThe benefits produced in FDI include not only measurable indexes, such as invest profits, GNP, volume of foreign trade and employments, but also measureless yet significant indexes, such as optimization of industry structure, technology advancement and system reform. The distribution of benefits between developed countries and developing countries mainly use measureless indexes. In FDI, multinational corporations obtained nature resources, cheaper labors and vide markets while developing countries obtained capital, technology, equipments and management technique that necessary for economic development. Through making and effecting various of favorable policies and making much concessions to foreign investors,developing countries induced amounts of FDI and gained measurable and measureless significant benefits. Therefore, distribution of FDI benefits is not average yet is efficient. Both parties can obtain prospective benefits.International Portfolio Investments is usually conducted by financial institutions, especially institutional investors from developed countries. The main benefit under International Portfolio Investments is sudden huge profits obtained by institutional investors through financial speculation. For developing countries, most capital of this kind flowed into the venture field of stock market and real estate market. Only small part of capital was utilized as long term development capital. As the financial market in developing countries runs not well and the financial regulation ability of the government on idle money is weak, the money crisis is prone to happen under money speculation conducted by institutional investors and huge idle money will flow out the country when crisis happened. Therefore, institutional investors from developed countries would be the biggest winner in International Portfolio Investments, while developing countries could get only small amounts of benefits yet bear enormous loss including sharp decrease of foreign exchange reserve and national income and much decline of economic development level. Such loss would much more than benefits obtained.Capitals that developing countries got under International Loan are mainly from multinational banks in form of commercial loans. Since 1970s, multinational banks increased commercial loans to developing countries dramatically, charged higher rate than that in developed countries markets, and obtained substantive interest income. While developing countries'burden of foreign debt was getting much heavier because of excessively large foreign debt, unreasonable structure of foreign capital, up-floating interest rate and huge interests disburses. In 80s, the world economy fluctuated and the price of primary products dropped rapidly, thus the foreign income developing countries earned decreased sharply and faced difficulty of debt repay, and at last the debt crisis broke out. Researches indicate that the International Loan can bring the same benefits as that in FDI while the debt crisis will make developing countries suffer heavy loss that is much more than benefits obtained.In conclusion, the result of distribution of international capital flow benefits is that developed countries obtained much of benefits while developing countries bore much of losses. There many reasons of historic and realistic can explain such result. In history, in order to possess land and fortune, main west countries invaded American countries, Africa countries and Asia countries to and pursued colonialism. They laid the foundation of unfair investing relationship today between developed countries and developing countries. Developed countries practised financial supremacy all over the world to pursue unfair benefits and conducted"New Liberalism"economic structure reform in developing countries with supports provided by international organizations such as IMF to create well economic environment for their multination corporations to enter into developing country markets. Defects of current International Monetary System such as unstable exchange rate system, unreasonable reserve system and inefficient international adjusting system make developing countries limited and affected by currency floating of developed countries badly. Monopolizing of multinational corporations and multinational banks results in developing country's minor position in distribution of benefits produced in FDI and International Loan. The financial speculations conducted by institutional investors aimed at sudden huge profits bring heavy loss to developing countries. Improper policies carried out by developing countries also lead to risk and loss in economic development.In general, developing countries have been standing a minor position in world economy and distribution of international capital flow benefits for a long time. The development of financial globalization indicates that the reasonable way to get economy rising for developing countries is to continue opening to the outside world and enter into globalization deeply. In the process of financial globalization, developing countries should carry out stable and proper economic strategy, effect financial opening step by step according to proper plan made against the condition of the economy and financial market, arrange foreign capital structure in a reasonable way, enhance management and regulation on foreign capital, and establish financial stability evaluating index system to maintain stability of finance. Corporations in field of politics and economy among developing countries should also be enhanced and common policies and principles should be insisted in international economic affairs so as to form combined force and seek benefits equality against developed countries. Meanwhile, developing countries should promote the reform of International Monetary System, improve international financial environment and self-situation so as to raise international position, optimize benefits and reduce risks and losses.