Study On The Risk Of Financial Liberalization In Shanghai Free Trade Zone

In the context of world economic globalization, most of countries have to give up financial deregulation and carrying on the process of financial liberalization reform as a new way to promote economic growth. There is no doubt that financial liberalization reform has got much attention. In order to adapt to the new international situation, Shanghai Free Trade Zone(SFTZ) promote the reform of financial liberalization to build a world-class financial center and to affect the national economic growth. It is particularly important to avoid the risks of financial liberalization and to avoid systemic risk. This paper is based on the risk of financial liberalization reform problem in SFTZ, and put forward targeted measures, in order to minimize the risk of financial liberalization.This paper is based on the new measures of financial reform in SFTZ, and to analyze the risk of financial liberalization reform respectively from three aspects upon the national situation and national condition. First of all is the risk of the CNY capital account convertibility. It is the basis of the financial liberalization reform in SFTZ, so in this paper the author made a detailed description and analysis about capital account convertibility. The author explained currency crisis, banking system risk and the risk of asset bubbles, which are caused by capital account convertibility, with the means of MRL(multiple linear regression),PCA( principal component analysis),LS(least square method). The next risk is CNY internationalization. This paper briefly described the present situation of CNY internationalization in our country and lessons from international experience, at the same time compared the differences between our country and foreign national condition with means of the Impossible Trinity, Triffin Dilemma, Financial regulation problem. The last risk is arising from interest rates liberalization. By analyzing the characteristics of the financial system in China, and drawing lessons from international experience, we can easily draw the conclusion the fragile banking system will be highly vulnerable to interest rates liberalization and the impact of national policies. So this article emphatically analyzed of commercial bank interest rate risk, liquidity risk, credit risk and adverse selection risk, etc. In view of the risks related to our analysis, the paper puts forward the pattern of financial liberalization, and the corresponding risk prevention advice in the end.In the basis of the financial system reform, the SFTZ should make full use of financial innovation, perfect the system of financial regulation and adopt the gradual method. Working with the countries concerned to prevent and defuse financial risks and promote steady China and even global economic growth.