On The Financial Integration And Financial Stability

As an inevitable result of the world economic integration, the world financial integration tendency has become an important characteristic of the current world economic integration tendency, having a widespread and profound influence on the world economy. As it promotes the world production development, it makes the international financial business risks increase unceasingly, makes the international financial business more and more difficult to supervise, and the international financial development more and more unbalanced.The first part of this thesis mainly elaborates on the financial integration; it elaborates it in the following three aspects. Firstly, it analyzes the connotation of the global financial integration. The concept of the global financial integration, put forward on the premise of the formation and continual development of the international commodity market integration and the international production realm integration, has deepened the financial internationalization and consequently formed the basic status and further development of the global financial integration. The financial integration refers to a development situation linking the whole caused by the mutual infiltration and mutual influence among countries (regions); The financial integration not only may be a situation, meaning the extreme situation without any barrier (i.e. so long as there is a barrier, it will be deemed as non-integration or division) but also may be a process, meaning the gradual abolition of the capital control and other institutional barriers that influence the integration degree. Next, this thesis makes an analysis of the relationship between the global economic integration and financial integration; The global economic integration refers to the dynamic development process of the economy of various countries in the world being unified in a common big market. The overall improvement of the global economic level has created certain material conditions for the integration promotion. The global economic integration is mainly carried out in two forms: One is the regional economic integration; and the other is the global economic integration. The most outstanding performance of the global economic integration is the global financial integration. From the viewpoint of the structure, the step of the financial integration is obviously quicker than the commodity trade integration. Finally, it analyzes the influence of the financial integration mainly from the positive side and negative side. The positive influence mainly includes: it has decreased and eliminated the international capital flow barriers, facilitated the financial intercourse among countries and the global financing, and promoted the effective disposition of capital and savings in the global scope; It provides investors with abundant investment instruments and channels, which help investors invest on combined assets in the global scope, find the best investment channels and investment varieties, decentralize investment risks, and enhance the financial investment income; It has improved the efficiency of the finance; It has lowered the financing cost and upgraded the enterprise productivity; It benefits the development of the international direct investment; The global financial market and international financial integration have become important strength for the governments of various countries in the world to advance the economic and financial liberalization and release the governmental control. The negative influence mainly includes: the transactions leading to the virtual economy have surpassed the transactions of the real economy far more, and this kind of relationship like putting the cart before the horse will possibly cause the shrinkage of the consumption market; Under the integration conditions, the characteristics of the international capital, such as speculation, profit tendency, and large-scale rapid flow, have filled the international financial market with risks and instability and increased the international investment risks; The integration has greatly changed the formulation and implementation environment of the macroeconomic policy, and has set a higher demand on and brought challenges to the governmental macroeconomic regulation ability of various countries; Under the integration conditions, a lot of capital, especially the international hot money can flow across the border freely and fast, the derivative financial product transaction is expanding rapidly, and the new-type future financial organs are emerging unceasingly, which aggravate the supervision difficulty of the governments of various countries and the international financial organizations.The second part of this thesis discusses the relationship between the financial integration and the financial stability on the theoretical foundation of the financial integration. Firstly, it discusses the relationship between the financial integration and the financial deepening, the concepts of which are both related and discriminative. The financial integration is the method, the enhancement of the financial efficiency is the goal, and the financial deepening is the process of enhancing the financial efficiency through the financial liberalization and other measures and also the unification of the financial liberalization and the financial efficiency enhancement. The financial integration may not cause the enhancement of the financial efficiency, and the financial integration process isn't the financial deepening process. Next, it discusses the relationship between the financial integration and the capital flow. Theoretically speaking, along with the improvement of the integration, the international capital with investment as the purpose will decrease in the financial market with a high relevance, and the transnational flow of the investment capital will also decrease accordingly. Thirdly, the financial integration will lead to financial risks. The broad opening of the financial market has increased the instability of the financial system; The relaxation of the financial control has aggravated the overdue fluctuation of the asset price, in particular the interest rate and exchange; The big flow of the international capital has had an impact on the domestic financial industry and increased the supervision difficulty of the financial market; The financial innovation has intensified the vulnerability of the global finance; Its disturbance to the governmental financial policy has weakened the independence of the monetary policy. Finally, it discusses the relationship between the financial integration and the financial stability. This thesis summarizes it in three points: 1. The vulnerability of the banking system increases. This thesis argues that the so-called vulnerability of the banking system refers to the internal instability and vulnerability resulted from the insufficient risk resistance ability of the banking system caused by the existence and evolvement of the high-risk status; 2. The undulation of the financial market increases. While the financial liberalization enhances the efficiency of the financial market in some aspects, it reduces the efficiency of the financial market in other aspects, the driving force of the bank in the financial innovation has obviously lowered, and the financial liberalization has increased the risks of clients and the financial industry itself; 3. The relationship between the financial market and the foreign market strengthens. The financial market integration has intensified the financial market competition, yet the competition intensification has caused frequent merger and reorganization of the financial organs, and made the financial business develop in the integrating direction.The third part of this thesis elaborates on the framework ideology of realizing the financial stability under the financial integration background. Firstly, we should establish, improve and perfect the laws and regulations propitious to the financial stability. This thesis summarizes it in three points: 1. Consummating the financial stability jurisprudence; 2. Consummating the financial stability coordination mechanism; The financial stability coordination mechanism is a kind of coordination and cooperation mechanism established to resist and convert financial risks and defend the stability of the entire financial system; 3. Consummating the financial supervision & management information sharing mechanism Next, we should establish and perfect the financial system that supports the financial integration and financial stability. The thesis summarizes it in three points: 1. The agencies of the People's Bank of China at all levels should take the lead in establishing the financial stability coordination & communication system of the financial regulatory departments at all level; 2. China State Council should take the lead in establishing the high-level financial stability coordination system; 3 We should speed up the construction of the payment system and enhance the stability of the payment system. Thirdly, we should establish the policy system and reform measurements that sustain the financial stability. This thesis summarizes it in four points: 1. Improving the formation mechanism of exchange rate and implementing a more flexible exchange rate system gradually; 2. Releasing the capital account control orderly; 3. Realizing the matching between the monetary policy and exchange rate policy; 4. Further deepening system reform of the state-owned banks. Fourthly, we should strengthen the risk resistance and control ability. Currently the strategies to be adopted are summarized in two points: 1.Advancing the domestic finance deepening strategy; 2 Advancing the international condition utilization strategy and foreign exchange reservation strategy. Finally, this thesis expresses the viewpoint that the financial control should be furthered strengthened, and suggests that the improvement and perfection of the financial supervision system should be completed in the following aspects: standardizing the entry criteria of the financial industry, constructing a proper withdrawal and crisis management system, enhancing the information disclosure system, implementing the strict capital adequacy supervision, and urging the financial agencies to consummate the internal control system.In the end, this thesis concludes that the international financial market integration is a double-edged sword, and the income is accompanied by risks. Therefore, both the developed countries and the developing countries supervise the financial market to different degrees. This article argues that facing the influence of the financial integration on the financial stability, we must guarantee from the systems by enhancing legislation, establish, improve and safeguard the financial stability system in the financial integration, consummate the financial policy, enhance the management and prevention of financial risks, and intensify the financial supervision and other measures in order to guarantee the financial stability in the financial integration process.