The International Floating Capital And Its Risk Prevention

Our country has entered into WTO on 11^th, December 2001. With the admitting deadline in financial industry approaching, our country accelerates the pace of financial system's reform. Recently, the RMB interest rate liberalization process has been deepened, while the exchange rate system also has been improved. As a result, the capital account liberalization is one of the trends in the near future. Under this situation, we must correctly recognize the flowing nature of hot money, especially study a series of lessons in financial crisis which happened at the end of last century. We try to find out a set of measures, which are suitable for our country's economic and financial development, and prevent us from hot money's risks vigorously. All of these play a great role in protecting our country's financial security. Therefore, it is necessary to study hot money's flowing risk avoidance in order to find a proper way to solve the problems in China.Firstly, this article begins with the concept of hot money, based on a description about hot money's characteristics, major part and its advantages, mainly analyze the risks which the hot money produces in the system of bank and financial market, and state the speculation mechanisms of hot money. Following, combining successful experiences and failure lessons on avoiding hot money's impact, from the aspect of which hot money inflows properly or excessively, it introduces the methods, which the central bank adjusts and controls, and financial supervisions, and under the situation of market's open-up, focuses on the coordinative operation of the interest rate policy and the exchange rate policy, which play an important role in controlling the capital flow, regulating the capital outflow and foreign capital shock. Finally, it states our country's situations and disadvantages during the financial reform process, overlooks the international capital and then raises some advices so as to avoid hot money risks.