Precaution And Control Of China's Financial Risk

Since the broken down of "Gold Standard System", the world economy is frequently obsessed by financial crisis. At the end of December 1994, Mexico government suddenly declared that Piaster would be depreciated to stop foreign exchange flowing out, which caused a financial crisis spreading to South American, Asian and global financial market. When people still had a fresh memory and feared at it after two years, Thailand, which is far from Mexico and had been famous for its high economic development, broke out another financial crisis, which destroyed economy greatly. The thesis investigates some common problems in the process of pursuing rapid economic development and pushing financial internationalization by analyzing these crises, which will benefit China in defending our economy from financial crisis itself. The characters of the crisis show some common problems in pursuing rapid economic development and pushing their own country's financial internationalization. These problems can be described as one point, that is overanxious for quick result, which causes one country's present economic system, economic structure and the supervise level lagging behind the demand of rapid economic development, and finally causes the failure of economic operation. China's economic and financial situation at present is different from that of Mexico and Thailand, which is embodied as follows: firstly, the balance of payments in China is good. Regularity item have always been in a favorable-balance state since 1990s, which amounts to 7.243 billion US dollars only in 1996; secondly, the situation of foreign capital management in China is basically satisfactory: time-limit configuration is rational, short-term capital amounts for only 10%, which is moderate; debt rate is 90% and repaying rate is 10%, are all under the international alerting line; capital is mainly invested in practicality- economy department; thirdly, the process of China's financial freedom is carried out according to the plan step by step. After 1994's reform of foreign exchange system, we realized free exchange conditions under the current account of RMB, and became wholly exchangeable of current account by December 1996. Afterwards, the capital market has not been opened in a hurry and we strictly manage the out-and-in of the foreign exchange in the capital item, which makes China's economy less obsessed by international idle funds during the process of rapid economic development. Therefore, it's believed that the possibility of occurring financial crisis in China is quite small in foreseeable future. However, the common problems mentioned above of developing countries, still exist in the process of economic development and opening to the outside world in China to certain extents. Thus, studying previous financial crisis and getting some favorable revelation should be of great significance for China to strengthen precaution of financial risk.