The Impact Study Of International Capital Flows On The Stability Of China’s Commercial Banks

With the intensification of economic globalization, the international capital flows have grown rapidly, and its flow speed is also accelerating. As a result, the stability of the banking system is threatened. Without a perfect financial system, it is important and urgent to find out a solution to keep the stability and improve the competence of the commercial banks while promoting the opening of capital account.This paper firstly describes the background, the purpose, and significance of the research topic, and gives a brief view of both the domestic and foreign literatures on the impact of international capital flows on the stability of commercial banks, after then, the paper makes comments on theories related to the stability of commercial banks both from the micro and macro perspectives. Furthermore, based on different point of view, such as a nation’s money supply, asset prices, the level of interest rates, bank loan quality, and so on, this paper also analyzes the influence of the international capital flow on the security, liquidity, and efficiency of commercial banks, and the transmission mechanism that affects the stability of banks. In addition, based on the relevant data from 2003 to 2013, the paper measured the stability index of China’s commercial banks through principal component analysis. By combining co-integration test and granger causality test, we come to the conclusion that there is long-term co-integration relation between the stability of China’s commercial banks and foreign direct investment, the ratio of money supply to foreign exchange reserves, the ratio of short-term debt to foreign exchange reserves. Especially foreign direct investment has the strongest effect on the stability of China’s commercial banks. Finally, according to theoretical analysis and empirical test results, and by combining the experience of Chile, Indonesia and Thailand, the paper puts forward a series of countermeasures and suggestions that intend to strengthen the stability of commercial banks, including perfecting laws and regulations, arranging the capital account liberalization order reasonably, broadening the financing channels, strengthening the banking supervision system, and promoting the process of the marketization of interest rate gradually, establishing the deposit insurance mechanism, improving the bank withdrawal mechanism, and so on.