The Impact Research Of International Capital Flows On China’s Stock Market Fluctuations

The increasing amount of international hot money always results internationalfinancial turbulence.The Mexican financial crisis in late1994,and the Southeast Asiafinancial crisis are good examples to illustrate the harmful effect of international hotmoney.Since exchange rate system reform in July2005，large amount of hot money hadbeen attracted by the RMB appreciation expectations to inflow into China,a greatamount of international hot money has flew into our country to make a profit onappreciation of RMB and asset denominated in RMB,For example:stock market,Thus itincreases the volatility of our stock market.Although our government has attachedimportance to the inflow of international hot money and took some actions to limit theinflow,as the pressure of RMB appreciation become greater,the amount of internationalhot money flowing into Our country is increasing． Under this circumstance， acomprehensive study on how international hot money flow into China,the amount ofinternational hot money and its impact on Chinese stock market are of greatsignificance.This paper first summarizes the relevant factors affecting international hot moneyflows on the basis of literature analysis of the international hot money into China’sreasons, such as: the expected appreciation of the renminbi, the Chinese propertymarket and stock market prices, risk diversification,etc.,and analysis of internationalhot money into China’s the main channel.Then sum up domestic and foreign scholarsof international hot money based on the estimation methods, to improve its estimationmethod to calculate the scale of hot money into our country.We stock the entire stockmarket as shares of total supply, taking into account in the short term, although therewill be new issue market, but the amount of newly issued shares of the stock relative tothe stock for the entire stock market becomes very small,the stock supply is veryinelastic short-term analysis of the international hot money come out of the stockmarket will affect the demand for stocks, but does not affect the supply of stock.Toaddress this issue．this paper uses VAR model to carry out an empirical test on theinflow of hot money and monthly data of stock price index.The result finds that hotmoney inflow indeed has driven stock price fluctuated sharply and results in about20%variance in the stock price index change.Finally,in the prevention of internationalhot money flowing into our stock market-related adverse effects of proposed countermeasures.