On The Management Of International Short-term Capital Flows

Since the 1980s, with deepening of financial globalization, the size of the international short-term capital flows around the world has been increased, its flows is more frequent. International capital flows is a "double-edged sword", on the one hand, it increases on a global scale the efficiency of the allocation of resources, greatly promoting the development of the world economy; On the other hand, frequent short-term international capital flowing makes the effect of a country's inside and outside balance of macro-economic policy greatly weakened, it can slso lead to serious unrest in the country's economy and could even trigger a financial crisis. Latin American debt crisis in 1982, Europe in September 1992 financial crisis, the financial crisis in Mexico in 1994, as well as the 1997 Asian financial crisis has proved the great destructive power of short-term international capital flows, there are indications that before these crisis, these countries and regions had emerged large-scale capital inflows.Considering China's current situation, domestic short-term international capital accumulation has reached a considerable scale. According to the People's Bank of China's (PBC) and the State Administration of Foreign Exchange's (SAFE) figures: in 2007 China's foreign exchange reserves add 461.905 billion dollars, during the same period the trade surplus and foreign direct investment (FDI) is 262.2 billion dollars and 82.658 billion dollars.According to the World Bank "residual"method, we roughly estimate that the annual inflow of hot money to China is 117.047 billion dollars; Using this method we estimate, in 2008 1-8 month alone the amount is nearly 90 billion dollars!Researching international short-term capital flows's management and reform in China will undoubtedly has practical significance! This paper is divided into three main sections. The first sections is the introduction and overview of the international short-term capital flows. The second sections detailedly analyzes its impact effect to the host country and world economy and gives the basis to international short-term capital flows's management; in this part, we detailedly explain impact of international short-term capital flows with theoretical analysis and normative analysis; At the same time international experience combined with data and the situation in China are used to proved this effect. In the third part of my thesis, detailed short-term capital flows in China is firstly introduced; then we spend a huge amount of data to estimate the current "hot money" scale with qualitative analysis and quantitative analysis; then we recalled and analyze the typical state's management experiences of international short-term capital flows ;at last proposals and roforms in short-term and long-term are raised to manage China's international short-term capital flows. The author believes that: in the current situation, monetary authorities in the short term can use direct or indirect methods to control short-term capital flows. However, from a liberal point of view, market-oriented regulation must be the main means to carry out a series of institutional reforms, such as: improving financial system, strengthen financial supervision mechanism; speeding up the building of the foreign exchange market to establish a reasonable exchange rate mechanism; promoting the orderly opening of capital accounts and expand the capital outflow channels, and so on, only with these reforms can China fundamentally improve the economic's capacity to resist impact.