An Empirical Study Of Factors Affecting China's International Capital Flows

China began the gradual financial liberalization in 1979. From then on international capital flow is taking more and more effect on the macroeconomic of China, to the extent that implementation of monetary policy is being influenced. Although Chinese government has been taking stringent measures for its own capital projects, the international capitals such as short-term speculative capital flow in and a large number of domestic capitals flow out through various channels, which are threatening China's financial security.Therefore, in order to maintain rapid, stable and sustainable development of economy, China must have the ability to control the international capital flow, which requires us to find out the major factors affecting international capital flow and develop more scientific economic policies on regulation of corresponding factors.Based on the background of contemporary international economic, factors affecting China's international capital flow at different periods were theoretically discussed. It is concluded that internal factors are the dominating factors, including price factors, such as China-US interest rate deviation, China's opening up degree, expected RMB exchange rate and domestic economic policies, as well as non-price factors, such as Chinese regulation system and population policies.At the same time, based on the international capital flow data in the period of 1980-2005, a mathematical model was proposed and studied using modern analysis. The results show that in the long run, China's economic growth and opening up degree play a major role in affecting international capital flow. While the effect of the China-US interest rate deviation is not obvious because of interference of policies.Finally, on the basis of theoretical and empirical analysis, effects of the international capital flow were discussed and several corresponding measures were proposed. It is expected that the Chinese government should reduce dependence on exports to the United States, maintain self-determination of RMB exchange rate, maintain proper influence of domestic policy and enhance controlling on the flow of short-term capitals.