International Short-term Capital Inflows Cause And Effect Analysis

Short-term capital inflow is a key focus in the field of finance after 1980s. Especially after the Asian Financial Crisis happened in 1997 and 1998, It arouses great attention of financial experts and governors around the world. The financial experts in each country make deep research in the effects of short-term capital on domestic and global financial environment and stability. They put forward many useful theories whose main view is that short-term capital has no relations with economic development but closer relations with economic instability. That is, the negative effect of short-term capital flow is far bigger than the positive effect. Therefore, governors of each country propose many policies to limit short-term capital inflow and domestic capital flowing to other countries. Short-term capital flow includes two parts: inflow and outflow. The paper mainly focuses on short-term capital inflow.Because of the going up of RMB appreciation pressure induced by American Dollar' lasting depreciation and china economy' strong increasing, along with the opening up of china financial market, lots of foreign short-term capital is flowing into china by different methods with the purpose of sharing in results of china' high speed economic developments and expecting to gain in rich profit after RMB' appreciation. The governor has already made efforts to limit the flowing of short-term capital for its huge quantity, but the amount flowing into china is becoming larger and larger along with the increasing probability of RMB' appreciation.This paper is written on this background and is trying to make reasonable analysis of reasons and effects of short-term capital flowing into china by combining theoretical method with demonstration. It is divided into five chapters. Chapter one presents the question by analyzing reasons and effects of short-termcapital flowing into South-east Asia countries before and after the financial crisis. Chapter two definitely analyzes reasons of short-term capital flowing into china in recent years by combining theoretical method with demonstration. Chapter three presents the negative effects of short-term capital flowing into china on china' economic and financial environment and stability. Chapter four introduces some measures to hinder short-term capital flowing into china from four different aspects. Chapter five is the conclusion part of this paper.