The Research Of The China Mainland's Short-term International Capital Flow Based On The Multiple Arbitrage Perspective

In the background of global economic integration and financial liberalization, the short-term international capital flows is developing at an amazing speed. Large number of short-term international capital flows seen to have close contact with the financial crisis in developing countries. However, the research of the China mainland's short-term international capital flows did not reach a unified conclusion. This paper abstracts from international capital fluctuations in the size of short-term international capital flows in a channel, and carries on the empirical research, to understand the driving factors of the short-term international capital flows from multiple arbitrage point of view, the Chinese economic and financial system influence and impact.At the beginning, this paper makes the definition of the short-term international capital flows according to its essence and realistic meaning. From the perspective of arbitrage, the essence of short-term international capital flow is to search for profit. The main factors expected to decide the international capital investment rate of return would be the exchange rate, the interest rate, the stock market and real estate market rate of return. In the other hand, the short-term international capital flows lead to currency appreciation and rising asset prices in the countries that capital inflow. Asset prices include stock price and real estate price.Based on analysis of China's short-term international capital inflows or outflows channel, this paper uses the extending of indirect method to estimate the scale of short-term international capital flows in China after comparing various methods. Based on the analysis of the monthly data from January 2000 to December 2013, this paper draws the conclusions:the change of short-term international capital flow scale can cause the changes of the RMB exchange rate, the real estate price and the interest rate differential between China and other countries, while the short-term international capital flow scale change is the result of the changes of the interest rate difference and the Shanghai securities composite index. Besides, China's short-term international capital flows Chinese can be explained to a large extent by fluctuations of their own, which mean a strong volatility and unpredictable characteristics. In the rest part that can explained by arbitrage factors, the nominal exchange rate of RMB against USD has a significant influence on China's short-term international capital flow, which responses quickly and affects long-term; interest rate differential between China and other countries and Shanghai securities composite index come next; the influence of real estate price is the weakest.Based on the empirical results above, this paper puts forward some relevant recommendations to reduce the impact of short-term international capital flows and to prevent the economic crisis. Firstly, improve the market system itself. Secondly, strengthen the early warning and supervision on the short-term international capital flows within the territory of China. Further, limited short-term international capital flow channels under the current account, especially the trade and non government departments transfer channels. Finally, steadily push forward the capital account opening and gradually realize the convertibility of RMB capital account.