The Impact Of Capital Account Liberalization On China's Cross-border Capital Flows

Since China joined the World Trade Organization(WTO)in 2001,its expanding scale of foreign trade,stable growing of Gross Domestic Product(GDP)and stable currency value all accelerate the cross-border capital flows,which promoting China's economy to integrate with the world's economy.Nowadays,China's capital account's subitems have been liberalized in a certain level,and the RMB capital items have become partially convertible.The capital account liberalization not only benefits the process of Internationalization of the RMB,but also contributes to the adjustment of China's economic structure.However,the liberalization of the capital account also brings the risk to China's capital market and financial system,which is caused by the large-scale capital inflows and outflows.Therefore,how to liberalize the capital account is a hot issue discussed by scholars all the time.Based on the studies completed by domestic and overseas scholars,this paper continues to study the project on liberalization of China's capital account.It uses empirical method to analyze the influence of the capital account liberalization on China's cross-border capital flows with the past ten years' quarterly data.First of all,this paper summarizes relative theories of the liberalization of capital accounts and cross-border capital flows.In terms of the capital account liberalization,this paper introduces the implication of capital account openness,compares various methods of measuring capital account openness,establishes a new index named sensitive capital account openness,and calculates the China's capital account's integral and sensitive opening degree from the first quarter 2005 to the third quarter 2016 successively.Furthermore,this paper discusses the meaning,basic characteristics and four major flowing theorems on the cross-border capital flows.On the basis of analyzing the economic theorems,this paper introduces the process and current situation of China's capital account openness systematically,and then analyses the current situation on the scale and structure of China' s cross-border capital flow through actual data.Finally,based on the discussion on the theories and current situations,this paper analyses the effect of capital account liberalization on China's cross-border capital flows by building mathematical model.This paper utilizes Granger causality?pulse response analysis and variance decomposition and chooses eight independent variables to carry on the research with quarterly data from January 2005 to September 2016.The result shows that compared with the integral capital account openness,the sensitive capital account openness has greater influence on China's cross-border capital flows.Therefore,the government is supposed to hold a cautious attitude on the liberalization on the sensitive items under the capital account.