China's Financial Liberalization Process In Financial Vulnerability

Nearly every country has made reformations in their financial system since 1970s'. These reformations include releasing financial restriction, increasing financial opening etc., which have made great progress in these countries. However, financial crises happened with high frequency at the same time for developing countries or developed ones. Policy constitutors and economists began to think about this reform. Whether this reform actually increasing financial fragility? If it is inevitable to all the countries that making financial liberalization reform and being incorporates, how to ease the bad aftereffect. While this problem is very important to China too.This paper starts with the concept of financial fragility and theories interrelated, and then put forward that we should analyze this concept from system point of view. It educes the connection of financial liberalization and financial fragility, which is that financial liberalization, is one of the forms of system transform, which shall affect the structure, and the effect is the increasing of financial fragility.Based on this analysis, we select some indexes about financial liberalization, and use them to demonstration the fragility of Chinese financial system. Then we validate the relationship between the indexes and financial fragility by regression. We find that the most correlative indexes are the inflation ratio, balance of CA/GDP and the GDP growth ratio. After analyzing these three factors, we draw our conclusion that is financial fragility has been increased along with Chinese liberalization reform, and the most important factors affected are the inflation ratio, balance of CA/GDP and the GDP growth ratio.At last, we analyze the risks that may possible increase the fragility in Chinese future reform, and make a brief discuss of the system construction accordingly.