China International Capital Flows: Fluctuation Characteristics And Influencing Factors

Along with the acceleration of the process of economic globalization and financial liberalization, there comes the unprecedented development of international capital flow, showing new features in scale, structure and form. Meanwhile, its complexity and uncertainty also increase greatly. As the second targeted country of current cross-border capital’s inflow, international capital inflow makes up for China’s domestic capital shortage and plays a very important role in the economic development. But at the same time, the persistent capital inflow increases the difficulty of monetary authority’s sterilization policy, which could cause a series of problems such as inflation and economic bubble. In addition, the flow and dramatic change of international capital, especially short-term speculative capital will harm the financial stability and may even cause the financial crisis. At present, our country is in the process of deepening open up and reform of the market mechanism, which means more necessity of research on the fluctuating characters and influence factors of international capital flow.International capital flow show diversity increasingly. Different forms of international capital flows share common features and have their unique characteristics at the same time. Therefore, the this paper analyze the international capital flows in further refinement, dividing the always international capital flows into four parts--international direct investment, international securities investment, other investment and other hidden capital. The study followed grasps the fluctuation characteristics and the influence factors of international capital flows from the lever of both total amount and structure.The paper combines the method of theoretical and empirical study as well as qualitative and quantitative analysis, using the semi-annual data of11years (2001-2011) to do the research. Firstly, it elaborates the affecting mechanism and direction of various factors such as domestic economic growth situation, the expected exchange rate and the interest margin. The next step is the statistical analysis of international capital flows, analyzing the periodicity and volatility on the basis of the separation of international capital flows’medium-term trends and short-term volatility. Then the paper applies the econometric method of stationarity test, cointegration analysis, granger causality test, and linear regression analysis to measure the influence factors overall and separately. The results shows less volatility of international direct investment, with the main affecting factors of the economic growth situation and expected exchange rate; The volatility of other investment and other hidden inflows are larger and relates closely to asset prices, expected exchange rate and interest margin. What’s more, there are strong speculative signs. Finally, according to the theoretical and empirical analysis results, this paper puts forward policy Suggestions including optimizing capital flow structure, consummating our country’s capital market supervision and adjusting the international capital flow in inverse cycle.