Resolution To The Capital Doubtful Recycling In China

Since the 1990s,a strange thing happened in many developing countries,on one hand,they borrowed surplus capital from developed countries with high interest rates,but on the other hand,the surplus capital flowed back to the developed countries in the form of treasure bills and other low-rate-of-return instruments. This kind of outweighed recycling of capital flows is also called capital doubtful recycling of Stiglitz.The same thing happened in China. We borrowed FDI with high costs,which greatly increased our foreign exchange reserves,but only to relend it in the form of treasury bills. This way of attracting foreign investment resulted in great welfare loss in our country. Why this happened?How much was the welfare loss?It's just the purpose of this article.This article will start from the introduction to the capital doubtful recycling of Stiglitz,and then analyze of characteristics of capital flows and balance of payments situation to introduce the basic information in China. To support the theoretical analysis before,we calculate the cost of attracting foreign investment and the earnings of foreign exchange reserves to get the direct revenue loss of capital doubtful recycling of Stiglitz.Then, this article will do some research on the recycling mechanism of capital doubtful recycling of Stiglitz in our country and analyze the nature of the phenomenon from the perspective of two-gap theory of our country. In accordance with China's actual conditions,we will elaborate the real causes of the phenomenon from the characteristics of the domestic economy. Besides,this article also explain capital doubtful recycling of Stiglitz phenomenon in China from the perspective of external factors.At last,while giving the current status of economic operation,we will discuss the reform measures to solve the problem in the future.