Study On The Influence Of International Capital Flow On Stability Of China’s Commercial Bank

After the crisis international capital flows have recovered, and a growing number of international capital flows to developing countries.At the year of2012, foreign direct investment flowing to developing countries was larger than developed countries for the first time. China as an emerging economy, due to the expected favorable economic prospects and the continued appreciation of the exchange rate, attracts a large number of international capital inflows. However, the total inflow of international capital fluctuates. With the gradually accelerating of China’s financial opening up of capital controls, international capital flows will gradually increase, and more active. Bank occupies an important position in a country’s financial system The stability of banking relates to the financial stability of the economy. In2007U.S. financial crisis and subsequent European sovereign debt crisis have illustrated the importance of bank stability to the economy of a country or even the global economy. Therefore, the research of the relationship between banking stability and international capital flows has important theoretical and practical significance to ensure the stability of the banking system, guard against and defuse financial risks and promote the healthy development of the economy.International capital flows have a direct impact on the stability of the banking, and indirect effects and secondary effects also. Direct impacts include the effects of direct investment, indirect investment, changes in bank deposits and foreign banks entering on bank stability. Indirect impacts include the effects of interest rates, exchange rates and money supply on bank stability. Secondary effects include the impact of different paths on the banks of stability. The direct and indirect effects occupy mainly for China, because the exit mechanism of China’s commercial banks are not perfect. Once banking is in crisis, the state government will actively provide assistance. The secondary impact of international capital flows will not study. There are many indicators and methods measuring the stability of banks. Domestic and foreign experts are taking different ways to measure the stability of the banks. On the basis of previous studies, I selected three categories of indicators to detecting the conditions of the bank in past20years. As can be seen from the charts, from1993to2012the index of China’s commercial banks stability fluctuated downward. The banking regulatory is effective, and the stability of commercial banks increased. After that, I select six variables as explanatory variables, bank stability index as explained variable. By unit root test, cointegration test and Granger causality test explain which variables affect the stability of international capital flows and the degree of impact on the banking.Select the growth rate of foreign direct investment, foreign securities investment, long-term debt and short-term external debt to reflect direct impacts. Select the ratio of M2and the foreign exchange reserves, the rate of exchange fluctuation two indicators reflect the indirect effects of international capital flows. Based on the condition of our country, consequential impact of international capital flows will not research. Outcome is that exchange rate movements, the ratio of M2representing foreign exchange reserves, foreign securities investment growth rate show a positive correlation on banking stability index. The growth rate of long-term debt shows a negative correlation on banking stability index. Rate of changes in exchange rate, growth rate of overseas securities investment and the ratio of M2and foreign exchange reserves are less important on the stability of banks. The impact of foreign direct investment is more significant.In terms of capital account liberalization trends, China should implement the classification of international capital, establish the deposit insurance system, establish early-warning monitoring system, strengthen the supervision of banks, diversify financial instruments to strengthen the bank’s internal risk control and enhance the bank stability.