International Speculative Capital Inflows, China's Trade In The Root

With regards to the study of international speculative capital inflows, it is resulted from the emerging economics of developing countries in export-oriented development process which depends on capital. But it is easy to cause fluctuations in the financial system and make negative impact on the real economy. So the academic work must be done on this issue. Moreover, the issue in China is of much difference, such as re-exports, domestic capital flight and so on. In response to these particularities, this paper is to estimate the total amount of the speculative capital through current account and other channels, and then, tries to find out the roots of speculative capital inflows based on empirical analysis.First, theoretical analysis provides supply, demand and institutional points to explain the causes. As the supply of U. S dollar is not subject to our control, we make it the exogenous variables, and so does institutional factors. I only analyze the roots through the demand level. It is worth mentioning that some speculative capital are originally from China, while, they tend to flight and then return, which also affected macroeconomic variables in China.In the empirical analysis part, the financial data and real economic data have different frequency and so I take two steps to solve the problem. Firstly, I use monthly data to analyze on the trade surplus, interest rate gap; the anticipated appreciation of RMB, and treasury gains. Then I use annual data to analyze the relationship between international speculative capital inflows and the trade surplus. Finally, it concludes that domestic and foreign interest rate gap and currency appreciation is affected by trade surplus and prompts the speculative capital inflows.In the end, the paper analyzes the negative effects of speculative capital inflows, and the international experiences to avoid or eliminate the negative factors. Besides that I point out the direction of further analysis in this paper.