Research On The Disturbance Effect On China’s Financial Market In The Process Of RMB Capital Account Liberalization

Accounting to the theory of market liberalization, capital control makes the allocation of resource fail. IMF committed to promoting the opening of capital account and financial liberalization. Since achieved the convertibility of RMB in current account in 1996, China has promoted the opening of capital account. Most of the capital items have realized partial convertibility, only a minority of capital items are under the strict control.Based on the latest international economic and financial situation and guided by international finance theories, the paper uses a combination of theoretical analysis and research methods to study the disturbance effect of the capital account liberalization. First of all, the paper summarized the definition of capital account openness and theories of international capital liberalization. Then it reviewed the course of China’s capital account opening, and described the present situation of direct investment, security investment and other investment. Based empirical data of China, the paper established the VAR model, VEC model and Granger causality analysis with the variables of capital account openness, financial market volatility and financial market development. The empirical results showed that there is a long-term equilibrium relationship between the variables of financial market development, capital account openness and financial market volatility. And degree of capital account openness is proportional to the degree of financial market development, the degree of financial market volatility is proportional to the degree of capital account openness, the degree of financial market volatility is inversely proportional to the degree of financial market development,. Besides, it showed that capital account openness will lead to financial market volatility in the current level of financial development. In order to explain the result if empirical analysis, the paper find the reason why capital account openness lead to the aggravating of the financial market volatility from the fact of financial market participant, financial products and the financial supervision. In the last part, the paper put forward six suggestions of promoting the capital account openness and maintaining the stability of the financial market., which is promoting the capital account openness orderly, building free trade zone, cultivating high-quality financial market participants, improving the system of financial products, promoting the reform of interest rate liberalization, the reform of exchange rate system and the capital account openness, and strengthening the supervision of international hot money.