The Effect Of International Capital Inflow On The Stability Of Banking System

Since 1980s, with the development of the globalization of the world economy and the process of financial integration, international capital flow is becoming more and more active. In our country, in recent years, especially after 2001, with the rapid development of China’s economy and the gradual opening of the capital account, international capital flows in China expands rapidly in scale. International capital inflows to China’s economic development has brought great opportunities, but also brought a great risk to China’s financial system.This paper aims to study the effect of international capital inflow on the stability of banking system, which is the main part of our country’s financial system. And with the consideration of it, this paper puts forward some relevant policy suggestions.On the basis of literature review at home and abroad, this paper first introduces the main factors that affect China’s capital inflows in recent years. Firstly, this part introduces the current situation and trend of capital inflows from three aspects:total amount, structure and term. Secondly, it summarizes the main factors that affect China’s capital inflows, such as expectations of RMB exchange rate appreciation,the spread of the RMB and other currencies and the development of China’s economy.Secondly, this paper analyzes the impact of international capital inflows on the stability of the banking system from the theoretical point of view. On the one hand, the direct impact of different capital inflows on the banking system, namely FDI, foreign debt and securities investment, is introduced. On the other hand, the impact of capital inflows on the banking system is analyzed, which is based on the stability of the banking system through interest rate, exchange rate and money supply.Again, this paper studies the impact of international capital inflows on China’s banking system from an empirical point of view. By using the BSS index to calculate the stability of China’s banking system, and by using Granger causality test to analyze the relationship between the international capital inflow and the stability of the banking system, the paper get a conclusion that the international capital inflow mainly affected the stability of the banking system through the macroeconomic variables of China’s economy.Finally, this paper analyzes measures to stabilize the banking system in China under the new international background and puts forward some suggestions from two aspects:international capital management and banking system itself.