Research Of International Hot Money Inflows In China

Along with the development of economic globalization and financial integration, thetrade ties between countries have become frequent increasingly, and it creates the conditionsfor international capital flowing among countries frequently, while the continuous innovationof financial derivatives makes it possible for international hot money to flow to othercountries in a variety of channels. The subprime mortgage crisis of USA outbreaks in2007,then it makes the evolution of the financial tsunami sweeping the globe, the world economytherefore suffered heavy losses. As one of the emerging market economies, China run out ofthe predicament of the economic recession firstly and has maintained a high rate of economicgrowth since the2005exchange rate reform, the RMB against the U.S. dollar continuedunilateral appreciation of U.S. dollar interest rates continuing to fall, Sino-US spreadsinversion phenomenon is very serious. In this backdrop, the appreciation of the renminbi isexpected to be very strong, more and more international hot money inflows to China throughvarious channels arbitrage. The financial industry is an important industry in China’seconomic development, and thus deepen the research into the problem of international hotmoney to ensure a healthy and stable development of China’s financial industry to the extentpossible to reduce the likelihood of financial crisis in China in wide extent, it has importanttheoretical and practical significance.This paper first introduces the size and channels of the international hot money of China,using the residual method to estimate the scale of the international hot money measure untilthe end of2010, hot money inflows in China reached180.8billion U.S. dollars, and thenanalyzes the channels of hot money into China in recent years, the main including the graychannels of the current account, capital projects channels, individual channels andunderground banking channels. Secondly, to analyze the reasons for the inflow ofinternational hot money in China, pointing out that the main reason includes the developmentof the international financial environment (financial liberalization, financial integration andcapital securities of the continuous development), China’s macroeconomic fundamentals andthe development of good, the expectation of RMB appreciation, China and the U.S. interestrate inversion, and the rapid development of China’s capital market. Once again, analyzing thenegative impact of the international hot money inflowing in China’s economy at all levels on in-depth, that it interferes with the implementation of China’s macro-control policies, increasethe difficulty of macro-control; weaken the effectiveness and independence of monetarypolicy in China, change the money supply structure, makes China’s implementation ofmonetary policy dilemma; a sharp rise in asset prices in China, seriously affect the healthydevelopment of the of the national economy; further increase China’s foreign exchangereserves, causing huge pressure to the appreciation of the renminbi. Finally, learning from theregulatory experience of other countries suffering from the impact of international hot money,we makes suggestions for China’s specific national conditions to prevent the international hotmoney inflows, such as to improve the RMB exchange rate regime, to build a more effectivemonitoring mechanisms, to strengthen international cooperation to prevent capital flows, riskcontrol, extraction of non-interest bearing reserve requirement, to levy the Tobin tax ifnecessary, as well as innovative foreign exchange reserves management and more.