Research On Impact Of International Capital Flow To Our Commercial Bank System Stability

Since the 1980s, the international capital has become increasingly active and has play an important role in world economic development. Under the promotion of the global integration of financial markets, securities, liberalization, financial creation and technological innovation, the international financial market has undergone tremendous changes. The scale of international capital flows expanding rapidly. For China, with the strengthening of reform and opening and foreign economic cooperation, China's economy has sustained rapid growth. Thus attracted more and more international capital flows, of which has reached an unprecedented scale in recent years. With the great opportunities of international capital flows, it also brought great risk to Chinese financial system. The banking system which is the pillar of the financial system, its stability decides the stability of the financial system, can be said the key to the prevention of financial crisis.This paper analysis the impact of international capital flow to the commercial bank system, of which is the main part of financial market. With the static of the economic data in recent years, analysis the impact mechanism, risks and factors of international capital flow to the stability of commercial banking system, on the basis analysis the impacting mechanism of different exchange policy. With the consideration of China's special management policy and the problem of Chinese banking system, discuss the influence of tremendous capital inflow to the stability of commercial banking system, then shows the Policy recommendations.Statistics People's Bank of China and the country's foreign exchange reserves Authority show that China's international capital has shown a net inflow trend over the years. The main reason is that international trade has been in a state of surplus and China's sustained economic development to attract outside capital investment and other means of capital inflow. Especially in the last two years, as development of western countries in general slowing down and the impact of the crisis of the United States secondary debt, the inflow of China increased significantly. It result in continued the appreciation of the RMB and China's foreign exchange reserves has ranked first in the world; The domestic liquidity is excess and expand the risk of inflation.State-owned commercial banks are the main composition of commercial banking system in China, Their assets proposition in total financial assets has always been more than 50 percent. The development of Joint-stock commercial banks, urban commercial banks and others do not perfect enough. This makes commercial banking system itself has many problems, such as non-performing loan rate is high and soft budget constraint, joint-stock commercial banks has low capital adequacy ratio. Imperfect market system and unsound management system also impact commercial banking system stability to some extent.The most direct effect of international capital flows to commercial bank is the performance of the banks balance sheet changes International capital inflow or outflow will lead to rapid change of banks'balance sheet. Developing countries often rely on the international credit to meet the domestic demand for funds, when the foreign debt grow to a large scale, the repayment pressure may lead to depletion of foreign reserves, caused the banking system crisis and currency crisis. China faces this problem in early years of reform and opening reform and opening, but in recent years, China's foreign exchange reserves increased year by year, there is no risk of the debt crisis.The impact of International capital flows on the banking system also through the impact of money supply. The net inflow of international capital increase will lead to the growth of foreign exchange reserves and the market demand for this country's money, thus leading to the country's money supply growth and the exchange rate rise, increased domestic inflation, deteriorate the operating situation of commercial banks; at the same time resulting in the shrinking foreign exchange reserves and foreign exchange asset values, so that commercial banks suffer losses. The country's policy to stabilize exchange and inflation rate by raising the deposit reserve policy would lead to the rise in interest rates, thereby increasing the speculative international capital flows, forming a vicious cycle.Statistics show that there presents the risk of foreign money back flow, and the proportion of real used FDI decresed rapidly, this means there is the possibility that capital inflows using FDI as pretense.China's banking regulatory measures remain some adaptation under international capital flows, So there are some recommendations: Government should encourage and promote foreign direct investment and other long-term capital flows by relaxing foreign direct investment inflow restrictions. For speculation, arbitrage and other short-term capital flows should take effective measures to limit them. Regulatory requirements in the shares of state-owned commercial banks to introduce foreign capital should be strategic investors, rather than financial investors. It should also increase the types of investment vehicles, improve the investment market. Due to historical and institutional reasons, state-owned commercial banks has some problems on quality, profitability, service targets and the international level, so it is necessary distinguish between investors. We should also carry on exchange controls to prevent excessive capital inflows.The recent focus should be to maintain all kinds of external borrowing (especially the bank's overseas financing) and foreign portfolio investment into the restrictions.It contains the "moral hazard", the current implementation of the QFII system should be prudent and promote strict management. Establish an early warning monitoring system as soon as possible.This paper proposes deepening the commercial banking system reform, Rising their own ability by focusing on the reform of state-owned commercial banks, the main problem of which is its single-property rights. So it should introduce diversified property rights system, It should also establishment of centralized control, independent assessment of the loan payment and risk management systems. There also needs prudent accounting, financial systems and market-oriented human resources management system. In this paper, deepening the reform of the financial system, improve the financial supervision mechanism, improve the commercial banking system operating environment, establishment of a deposit insurance agency. Sound legal system, are also been put forward.