The Relationship Between International Short-term Capital Flows And Real Estate Price Volatility Of First-tier City In China

With the Liberalization, Internationalization and Integration of the World Economy and the rapid development of stock market and derivative market, the short-term capital flowing on a large scale is the important economic phenomenon in this tendency. It can exert the great influence on the economic development, market stability and financial safety of one country. Even, it is the culprit of the currency or finance crisis in many developing countries. With our county’s opening proceeding steadily and the capital account’s control deregulating gradually, the barriers of short-term capital flow in China is cleared step by step. All kinds of arbitrage capital flow in China. It has affected our economic grow, assets price rise and policy validity. If capital flow reverses, it is possible to endanger our financial safety.Nowadays, the real estate market has become the basic industry of economy which has direct and obvious influence on macro-economy. Huge profit make massive short-term profit flow into China. However, the collapse of real estate market was always accompanied by the international short-term capital flight in previous financial crisis since1990s. Take Japan’s economic crisis in the90s, the Asian financial crisis in1997for instance, due to the funds flight, the capital supply crunched and the cost of capital increased which made the real estate industry experience capital chain crisis in each economic crisis. As a result, the research about relationship between short-term international capital flow and real estate price changes is of great theoretical significance and policy implication.The VAR modle is used to make empirical analysis of the relationship between short-term international capital flow and real estate price changes in this paper. Through the work mentioned above, the following conclution can be reached: Firstly,the real estate price change has an impact on short-term capital flows in our country, but only under the condition of large fluctuations in the real estate market, the short-term international capital flow will appear obvious changes. Secondly,the change of short-term international capital flows in our country doesn’t have much impact on real estate prices in our country. Compared with the short-term international capital flow change in our country, the real estate price change affects itself more. Finally, at the present stage, short-term capital outflow in China is normal,which will not result in a crisis of the real estate market, and will not cause the outbreak of the financial crisis in our country.This paper argues that the Chinese government needs to pay attention to the following points. Firstly, regulate the administration of international capital flow, speed up the opening of capital account and make the international short-term capital flows detective. Secondly, prevent short-term international capital flows from their sources.