The Management Of Chinese Cross-border Capital Flow Risk

After 1978, China has relaxing the controls on capital flows. In 1994,China does a series of reforms in foreign exchange management system, and the RMB current account realized convertibility. On the basis of this reform, China started to accept the paragraphs 2-4 obligations of Article VIII in IMF Agreement from December 1996, achieving the RMB current account convertibility. Then the difficulties of capital controls is highlighting and it's difficult to guarantee the effectiveness of capital controls. Theoretically, in the case of current account convertibility, it is difficult to implement the capital control effectively. The higher the degree of current account convertibility, the more omissions and alternative channels in capital flight. Therefore, to reasonable guide cross-border capital inflows and outflows, to reduce the impact on China's economy from the liquidity risk, to promote the normal development of China's economy and maintain the macroeconomic stability, the study of cross-border capital flows management is of great significant.During this paper, on the base of reviewing the theory of the cross-border capital mobility risk, we analyze the characteristics of the cross-border capital flows: the cross-border capital flows accompany to China's economic growth and at the same time showing a two-way movements in capital flows. This paper reviews the practice of cross-border capital management in Thailand, Malaysia, South Korea, Brazil and other emerging market countries in the 1990 s, proposing to learn something from the inappropriate capital controls relaxing in Thailand and Mexico. Adopting appropriate policies to regulate short-term capital flows timely, using fiscal and monetary policies to prevent the risk of financial crisis rationally. By the empirical of the effect of the cross-border capital flows to money supply, then the money supply affects the market price. The author demonstrates the above conclusion taking the stock market and exchange rate as an example. The article concludes with some suggestions for the regulation of the cross-border capital flows.