| Since the beginning of the 21 st century,the process of China's capital account liberalization has been accelerated significantly.The Chinese government successively launched the Qualified Foreign Institutional Investor(QFII)system and the Qualified Domestic Institutional Investor(QDII)system,and carried out market-oriented reform of the RMB exchange rate system.These opening policies are not only a response to the trend of economic globalization but also necessary measures to promote domestic economic development.China is currently in the midst of economic transition.Capital account liberalization can bring more capital inflows and thus ease the problem of financing constraints.Moreover,it also speed up the pace of economic reform by breaking domestic financial barriers and improve financial efficiency.Although capital account liberalization may benefit the domestic economic growth,we cannot neglect the huge risks it brings.The opening of short-term capital projects is likely to lead to large-scale capital inflows or outflows,which often damages to the financial stability and triggers financial crises.At present,we are in a world that is full of uncertainties.Unfavorable factors such as the rise of trade protectionism and geopolitical conflicts will greatly increase the complexity of cross-border investment activities.Therefore,How to manage international capital flows has become an important proposition of China's macro-prudential supervision.There has been a lot of research on the impact of capital account liberalization on capital flows,but most of them are macro level studies.As different investors react differently to the capital account liberalization,these macro level studies may conclude biased results due to the ignorance of individual heterogeneity.In addition,the existing literature on the capital account liberalization mostly focuses on the capital inflow brought by the liberalization of capital account and its direct effect,while there is little research about the spillover impact of capital account opening on capital inflows of foreign countries and the indirect effect of China's capital outflow on domestic institutions.The spillover effect brought about by the capital account liberalization is worthy of study for further understanding the international influence and domestic benefits of capital account liberalization.The thesis firstly makes a theoretical analysis of the impact of capital account liberalization on capital flows based on an international portfolio selection model.Based on the data of Emerging Portfolio Fund Research(EPFR),we conduct empirical tests on the direct impact of China's capital account liberalization,especially on the fund level investors' reaction to the liberalization.On the other hand,we also conduct an empirical study on the spillover effects of China's capital account liberalization on capital flows in developed and emerging market countries.Finally,we focus on the QDII regime,which is representative policy of outward capital account liberalization,to study the spillover effect of capital account liberalization on the performance of fund companies in the domestic market.The main conclusions are described as follows:(1)Theoretical analysis proves that capital account liberalization will increase investors' asset allocation to the opening countries and result in capital inflows.Our empirical results also support that China's capital account openness policy will attract more capital inflows,and even outward liberalization will cause more capital inflows.Fund level evidence shows that capital account liberalization will increase the share of Chinese equities in the portfolio of international mutual funds.Further examination suggests that funds with higher management skills are more responsive to capital account liberalization,while funds with less risk diversification demands and greater net value volatility are not sensitive to capital account liberalization.Large-cap,growth and diversified funds will hold more Chinese stocks when the China's capital transaction is more liberalized.However,funds of different scales and different liquidity have no significant difference in the actions of investing in China's stocks when facing the capital account liberalization.In addition,the positive effect of the capital account liberalization on the equity holding of the international mutual fund for China listed company is strengthened when the financial economy of China is booming.However,it is weakened when the real economy of China is prosperous.Finally,the positive effect of the capital account liberalization on the equity holding of international mutual fund for China listed company worsened during the crisis period.(2)The opening of China's capital account will result in a decrease in capital flowing into developed countries and an increase in capital flowing into emerging market countries.Furthermore,both capital inward and outward capital account liberalization policies will reduce capital inflows in developed countries,while for the emerging market countries,loosing QFII limit and company IPOs will result in net capital inflows.However,the outward opening of China's capital account has no significant impact on capital inflows in these countries.In addition,when international market yield is high or the global liquidity is sufficient,the negative spillover effect to the developed countries will be weakened and the capital inflow effect of emerging market countries will be enhanced.When the international risk is at high level,the capital inflows of emerging markets due to the opening of China's capital account will decrease.(3)The QDII has a negative impact on the investment performance of fund companies in the domestic market.On the other hand,this thesis finds that for fund companies that already have QDII business,the companies with larger QDII scale,more QDII funds will help reduce the negative impact of investing in overseas markets.Further investigation of the characteristics of the QDII also suggests that investing in the regions with higher levels of finance development can make up for the negative effect of QDII.However,the greater the difference in the degree of financial development between the destination country and the domestic market will increase the negative impact of QDII.This thesis also investigates the role of fund characteristics in the impact of QDII.We find that the company with larger scale,more funds,and more capital inflows,will receive smaller negative impact on the performance of the domestic market after the setting up of QDII fund.This thesis may contribute to the literatures in the following aspects:(1)We discusses the impact of China's capital account liberalization on capital flows in the micro perspective,which is a meaningful supplement to the existing research.We also investigate the role of fund's heterogeneity in the impact of capital account liberalization on the equity investment in China.The results may have policy implications for the supervision of different investors during the capital account liberalization process.(2)This thesis not only study the impact of capital liberalization on the flows into China,but also further discusses the impacts on other emerging market economies and developed countries.Moreover,we apply different measures of capital account liberalization in the study and discuss the different impacts risen by the different form of liberalization.(3)Although there are numerous studies on the learning effects of economic openness in developing countries,they are all limited to the perspectives of import and foreign direct investment.The learning effect of capital account liberalization is rarely studied.This thesis studies the benefits of the outward liberalization of capital account from the perspective of learning effects,which makes up for the gaps in existing research. |
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