| Since the 1980's, China began to step into the world. China has made greatachievements in the last twenty years. The opening of economy id majored in thefull use of international markets and foreign production factors. Above all,capital is the most important factor. The usage of foreign capital in the past years is direct investment in China.With the flowing of capital, developed technology and administration experiencehave come into our view. The establishment of a great number of foreigncompanies in China has contributed a lot to our country. But now we find that todevelop more fast we need more capital. The better way of acquire foreigncapital is the stock investment. The stock investment can bring capitaladministration experience which we are short of. And with the opening of capitalaccount, China could establish an efficient economic system,which could to agreat extent lower market risk and improve production. The further opening of capital market may also bring a lot of internationalrisks. Thinking about the financial crisis taking place in Asia in 1997, we mustpay great attention to the risks that is incidental to the opening. Stock market is the center of modern economy. It is very sensitive to thechanges in markets. What happens in the stock market usually has greatinfluence on the whole economy. It is always vulnerable to international capitalflight. Therefore, we must pay great attention to it. The aim of the thesis is to declare the good effect that the opening capitalaccount would bring to our stock market. At the same time, the market risksshould be noticed. We should accelerate the development of our stock marketregulations and principle. We should also establish macroeconomicadministration method to lower the risks Chapter one accounts the present situation of our capital account. In sectionone, a proper definition of capital account is given. Chapter two gives an accountof the partly-opened capital account of China. In section three, QFII is explained.It is said that this QFII has made a successful start of radical opening of Chinacapital account. Chapter two tries to explain the development and risks our stock marketwould experience after the opening of capital account. Section one gives aprescription of our stock market. Chapter two uses the Mundell Triangle modelto explain the operation of interest rate and foreign exchange rate after theopening. And the significance of foreign exchange rate spectrum is pointed out.Section three accounts the important advantage that the opening of capitalaccount would bring to our stock market. Section four gives a description of therisks that the opening would bring to us which we should pay great attention to. Chapter Three is an important part of this dissertation. Since the opening ofcapital account is unavoidable and the fixed exchange rate system is necessary tolong-term investment in China, we must present a compromised policy instead ofradical ones. Section 1 makes an analysis on the special risk of China stockmarket and gives out some methods. Section 2 makes a proposal of economicpolicy portfolio according to Chinese factual temperament. As a developingcountry, the independence of monetary policy is very important. The centralbank must guarantee this independence. In order to attract long-term investmentfrom abroad and minimize risks in capital account, we propose that the centralbank choose the policy portfolio of foreign exchange rate varying spectrum andalmost-independent monetary policy. This kind of policy portfolio is in fact anapplication of Mundell theory. It is of practical sense. Section 3 is importantcomplement to the proposed policy. In order to control the flow of too muchshort-term capital, we must establish an efficient system of watching andexamining. The particular innovations in the research are as the following: 1.Putting forward the policy portfolio of the almost independent currency policy, the opened capital account and the system of foreign exchange rate spectrum. 2.Underlining the important effect of offset policy... |
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