The International Economic Cycle Volatility On China's Economic System

The research of business cycle transmission mechanism theory plays an important role in macroeconomic study. Different theories based on different assumptions, the conclusions are also different. Someone stressed the importance of investment, but also the others emphasize the importance of money. In short, different theories consider the root of fluctuations in the economic cycle is different. In this view that the business cycle fluctuations in the path of the transmission mechanisms are also different. In the past, the study of business cycle fluctuations transmission mechanism was in a country circumstance, while a relatively small number of studies have considered the impact of external factors, especially in international trade, foreign direct investment and other factors. Although there is some theory involved in these factors, they do not take them as important factors.With the development of economic globalization, trade and capital flows between different countries become more and more frequently, so that the impact of these factors in the business cycle fluctuations become more and more important. When a dominant country facing economic fluctuations will affect the economic stability of the other countries, through the international trade and capital flows and other factors. Especially from the case of US "sub-prime crisis", we will know the fact that countries are close contact with each other. When the U.S. economy fluctuate, because of the other large countries in the world have a strong contact the U.S. economy, the economic crisis will spread to other countries. The crisis will gradually transfer to some of the relatively small country through these countries, and would result in a global economic fluctuation.Fluctuations in global economic indicate that the international business cycle fluctuations must require a medium, and it means the transmission mechanism of international business cycle. Through this mechanism, the fluctuations in the US economy will gradually spread to the other countries. Wherefore, the he transmission mechanism of international business cycle will be of great importance. From the view of international economics, the economic contact bridges are international trade, foreign direct investment as well as the foreign currency reserve assets. Although a lot of scholars have studied this issue, the research is still pending challenges.This article study the transmission mechanism of international business cycle from the perspective of international trade, foreign direct investment and foreign currency reserve assets, which will be of far-reaching significance to the formulation of macroeconomic policies in China. Through the theoretical study of the transmission mechanism of international business cycle can be better for our country to formulate strategy for the economic cycle fluctuations, at least, this study will alleviate the negative impact of the other countries economic fluctuations to China's economic growth.The role of international trade in the transmission mechanism of international business cycle is very important for some export-oriented developing countries. The factor will affect a country's import and export department, thereby affecting a country's economic stability. These countries rely on trade to boost the country's economic growth and employment and income growth. In view of the impact of international trade to national economic growth, international trade is the bridge of different countries products markets, when a country's exports fluctuate, it will directly affect the country's economic growth, thereby affecting their employment and income stability. For developing countries, the majority of staff employed in the second industry and tertiary industry, when faced with fluctuations in exports, it will affect the number of enterprise employment, thereby affecting their income levels. When the employment and income fluctuate in the export department, it will through various channels affect the stability of employment and income of the other sectors, furthermore, the fluctuations will spread in the overall economy.When foreign direct investment goes in a country, it means the external injection of an investment, and it will effectively promote economic growth and employment in the country. At the same time, it will also increase the volume of the country's employment. However, foreign direct investment is different form the local investment, which also has a spillover effect. Foreign direct investment for developing countries in general will bring about "technological spillover" effect, and this will promote the upgrading of domestic industries, thus further promoting its economic growth. At the same time, foreign direct investment can also stimulate the investment which is associated to foreign direct investment industrial, and then it will stimulate a country's employment in a broader sense. Because of foreign direct investment profits reflux, foreign direct investment can also affect a country's international balance of payments stability. Although foreign direct investment entering the country will form an investment, foreign direct investment profits will be remitted back to the parent company, when its profits back to the parent company is greater than the inflow, it will affect a country's capital and financial stability, thereby affecting the country's external balance, thereby affect a country's economic stability.The impact of changes in foreign exchange reserves on a country's economy depends on the quantity held by the country, for the developing countries, because of its implementation of export-oriented economic growth policy, have accumulated many foreign currency reserve assets through the international trade. At the same time, because of the developing countries, such as China implements a managed floating exchange rate policy, which causes the stress of supply and demand in foreign exchange market not to be a good release, thus forcing the central bank had to offset the foreign exchange reserves. Thus, the result will have an impact on the economy. In view of the impact of foreign exchange reserves on a country's economic growth, the accumulation of foreign exchange reserves equivalent to a country's savings assets, and thus be able to promote a country's investment and further promote economic growth, especially the use of the central bank's sterilization policy instrument, it will increase the country's base money, and further promotes the country's economic growth. But the policy also has a cost, when a country's base money invested more than the economy can accommodate, it will raise the price level, which will causes inflation, thereby it will be affect the economic growth stability.Overall, when a country's economy fluctuates, especially big countries, will impact the world-wide economic fluctuations through these three factors. and gradually transfer to other countries in the world.