Early Warning Analysis Of Abnormal Capital Flows In China

In recent years, due to further advance the world currency convertibility, cross-border capital flows is becoming more frequent and increasing scale, complexity further enhanced. Large-scale capital flows to meet the investment demand, but also makes macroeconomic and financial vulnerability of the internal system has become more prominent. Concentration of international capital flows, causing a country's credit expansion and currency appreciation pressure to speed up the formation of bubbles in the economy; capital outflow will cause the devaluation of the currency pressure, triggering the debt crisis, currency crisis, exacerbated by economic contraction. At present, capital flows to some developing countries has become a great influence on the impact of large economic, it is very urgent that analysis capital flows in order to avoid the abnormal impact on the economy.This paper reviews Capital flows theory and summarizes the overview of capital flows including using foreign capital, foreign debt size and capital flight in China. The paper then analysis the performance and the reasons for abnormal capital flows and do an Empirical Analysis of early warning on abnormal capital flows by Mutation Models.Through analyzing the early warning system, it finds that the indicators have larger changes in 2003 and 2007. The total amount of capital flows is the most abnormal in 2003 and the largest in 2007. The comprehensive evaluation value calculated from principal component analysis shows that the rapid growth of capital flows has reached the very high level of early warning which is to have the impact on the economic development.