An Study On The Fictitious Economic Effect Of International Capital Inflows In China's

Since 1980s, the fictitious economy has deepened and grown rapidly with the separation from the real economy in China. Under this situation, the international capital inflow which is the major representation of fictitious economy has become a critical factor to China's economic growth. But one thing can not be ignored is that this inflow produces a series of fictitious economic effect while promoting the real economic growth; therefore, it brought more and more risks to China's real economic growth. In this context, fully understanding of fictitious economic effects of international capital inflows and effective management of the international capital inflows has important practical significance to ensure the healthy development of China's economy.According to logic structure this research is divided into four parts:The first part, chapter 1, introduces the research background. This chapter introduces the research background, related concepts, domestic and foreign research status, and the research idea, methods and innovations.The second part expound research basis, including chapter 2 and chapter 3.In chapter 2, the author expounds the theory basis. This chapter discusses the theory of the economic effect of international capital inflows; the relevant theory of international capital flows to effect real economic effect and the effect of fictitious economic according to logical thinking is summarized. From the study of international capital flows, the real economic effect theory point of view, including the effect of economic growth theory, welfare effect model and the theory of industrial structure effect. From the study of international capital flows to the effect of economic fictitious theory of view, mainly from the international capital inflows to the host country's money supply, monetary policy and the impact of the financial system, the perspective of research, including Kindleberger's theory of international capital flows, Mundell Fleming model, Krugman's "impossible trinity" and the third generations of currency crisis theory. Although these theoretical studies did not directly address the effect of fictitious economic, but from the content of their research is not difficult to see that international capital inflows to the host's fictitious economic system the important impact. In chapter 3, the author expounds the reality basis. This chapter describes the international capital inflow in China after reform, based on management system of foreign exchange and capital account opening process. Since the reform and opening up, China's foreign exchange management system reform through changes in the initial stage, the boost phase of reform and reform and improve the stage. Corresponding to this, capital account controls that have gone through a liberal admission and strict management to prudent management, and then to gradually ease out of control, gradually opening up the process. Against this background, China's international capital position is also significantly ups and downs, has gone through the 1982 to 1991, relatively stable growth phase,1992 to 2001 and 2002, rapid growth phase after phase of large-scale influx. Overall, China's foreign exchange management system with the continuous deepening of capital account openness and constant improvement of the scale of international capital flows showed growing trend.The third part demonstrates research content, including chapter 4, chapter 5, chapter 6 and chapter 7.The fourth chapter mainly demonstrates the foreign exchange market effect of international capital inflows. This chapter first analyzes the international capital inflows on the currency exchange rate impact of the general mechanisms. According to international capital flows on exchange rates affect the general mechanism, the paper then combined with the actual situation of the RMB exchange rate changes on international capital flows to the appreciation of the RMB exchange rate pressure for the empirical analysis and measurement of test. The results from the experience of view, our country since the beginning of 1994 a major reform of RMB exchange rate system, the nominal exchange rate of RMB appreciation on showing a continued trend. In 2005 RMB exchange rate system to further reform, the RMB exchange rate to accelerate, and in the process, the rapid expansion of the scale of international capital flows can not be ignored. Measurement test results show that, regardless of international capital is to take the form of FDI or non-FDI form, have given real exchange rate appreciation caused by the pressure.The fifth chapter mainly demonstrates effect of money market of international capital inflows. This chapter first analyzes the international capital inflows on the general impact of excess liquidity mechanism, the continued inflow of capital in the international process, the central bank to maintain exchange rate stability will increase the base money passively, while the excess reserves of commercial banks will make money multiplier larger than before, resulting excess liquidity. Next, use historical China's international capital flows to do empirical tests. The basic conclusion is:either from empirical analysis of view or from the econometrics test results, sustained international capital inflows force the central bank increased the base money, make fast money supply growth, resulting in excess liquidity pressure.The sixth chapter mainly demonstrates bank credit market effect of international capital inflows. This chapter first analyzes the inflow of international capital markets in general effect of bank credit mechanism in the international capital continued to flow into the process. On the basis of this paper, international capital flows in China the actual data on China's international capital flows effect of bank credit to the empirical analysis and measurement of test. In the empirical analysis, the paper points out: international capital continued to flow, resulting in too much money our banking system, deposits and loans poor widening; At the same time, the scale of China's rapid expansion of bank credit has brought great risks to the stability of the banking system in China. This paper uses VEC model, impulse response and variance decomposition method of quantitative analysis to analyze China's international capital flows and the bank balance of deposits and loans has been tested. Empirical analysis showed that: international capital flows, especially the impact of FDI inflows on the bank balance of deposits and loans in China was significant; in the long term, the impact of international capital flows is significant, and the cumulative effect can not be ignored.The seventh chapter mainly demonstrates securities market effect of international capital inflows. This chapter first analyzes the international impact of capital inflows on the general stock market price mechanism. In the analysis of international capital flows on stock market prices affect the general mechanism, the paper combines the reality of our country on international capital flows on the impact of China's securities market price analysis and econometrics test. From the experience, the gradual opening up of China's securities market, attracting a large number of international capital, especially in a number of international hot money, funds in the domestic stock market driven feature is also a more obvious case, promoted the irrational stock prices rise. From the econometrics test results, FDI inflows and other investment inflows relative to portfolio investment inflows on the promotion of the impact of China's stock rose even more significantly.The fourth part, chapter 8, sum up the research goal. This chapter studies the developing countries management experience in capital inflows, based on analysis of management policies in our country the status of capital inflows, and how to improve our management of capital inflows, the policy suggestions including:(1)guide FDI inflows, and promote faster development of the real economy. Guided by taking reasonable distribution of FDI and regional distribution of industries, increase the technology content of FDI, encourage technological innovation, and effectively change the mode of economic growth, policy measures to promote the real economy in China faster and better development. (2) Managing the structure of capital inflows to prevent the fictitious economic collapse. We should encourage FDI inflows, while use the effective control of portfolio capital and other investment capital flows; in the term structure of international capital flows, we should strengthen the management of short-term capital inflows. (3) Reinforce the institutional basis of management policies to improve the effectiveness of capital inflows. China should speed up reform of the foreign exchange market to improve the RMB exchange rate formation mechanism, strengthen coordination of monetary and fiscal policy, and promote capital account liberalization in the process of making good use of exchange control policy. (4)Maintain a stable economic environment for financial operations and prevent the risk of reversal of capital flows. Sound macroeconomic environment is an important prerequisite for financial stability. Only by maintaining a stable macroeconomic environment, we can improve and perfect the domestic financial system in order to effectively preventing the risk of reversal of capital flows.