A Study On Factors Of International Short-term Capital Flows Into China

With the increasing openness of China's financial, the international short-term capital flows (SCF) has exceeded the direct investment, becoming one of the major means of capital flows with characteristics as high liquidity, chasing profit, and difficult to track, and it has become a significant risk of China's financial security. At present, the Chinese financial market is imperfect, and its regulatory system is not sound, thus a study on factors of international short-term capital flows into China has important practical significance.This paper based on the study of the past scholars analyzes China's status of international short-term capital flows. The stock market returns and real estate price index of these two indicators has been joined into analysis in addition to the GDP growth rate, the interest rate difference and the exchange rates of these three indicators commonly used by classic literature. Through the establishment of cointegration equation on international short-term flows, all factors are quantitatively analyzed based on the annual data from 1997 to 2009. The results show that the interest rate difference, the GDP growth rate, the exchange rates, the stock market returns, the real estate price index have significant effects on international short-term capital flows into China. The effect of the interest rate on international short-term flows has not diminished, which is different from the past scholars, and this result may be caused by the fixed exchange rate system and inadequate interest rate market.Finally, from the point of view of this study on the factors of international short-term capital flows into China, policy recommendations are put forward, for instance, the operation mechanism of the stock market and the real estate market should be improved, the interest rate should be determined by market, and the development strategy of internal and external balance should be implemented.