Risk And Interest Rate And Exchange Rate Policies Of China's Capital Account Liberalization

Capital account liberalization is the currency of capital items could be exchange freely. At the background of financial capital globalization, Capital account liberalization is an unconvertible trend. Just like a sword of two blades, capital account liberalization brings a lot of risk to a nation's economy as well as some benefits. In recent years, many financial crises related to capital account liberalization closely. After capital account liberalization and international capital flowing freely, the relation of interest policy and exchange rate is closer. Unsuitable interest policy and exchange rate is an important factor of causing financial crisis. As the instrument of national economy adjustment, interest policy and exchange rate have effect on protecting national economy safety.The article divided into four chapters.The first chapter: the concept and promotion of capital account liberalization. This chapter introduces the international regulation of capital account liberalization and the situation of capital control in china. The inner factors of promotion are economic advantage and the feebleness of effect; the outer factor is the effect of financial capital globalization and entering WTO.The second chapter: the risk of RMB capital account liberalization. Capital account liberalization makes international capitals flowing, so it can strike the national economy. Capital account liberalization brings the risk of unbalance in balance of payment, fluctuation of exchange rate, unsteadiness of financial market, capital escaping and currency crisis.The third chapter: the relation of capital account liberalization risk and interest rate policy and exchange rate policy. In the opening economy, the relation of interest rate and exchange rate can be reflecting from IS-LM-BP model, the theory of interest rate parity, and international balance of payment. Unsuitable interest rate and exchange rate are important factors; using interest rate and exchange rate to adjust the aspect and scale of capital flowing is a important way of avoiding financial risk; but on the capital account liberalization circumstance, fluctuating exchange rate is better than fixed one.The forth chapter: buildup a system of interest rate policy and exchange rate policy. We should build a flexible exchange rate policy, market decided interest rate and short money market.