An Empirical Analysis On The Reasons Of China's Capital Flight

The academic have showed their concern over the issue of capital flight in developing countries since the countries in Latin America witnessed serious debt crisis occurred in 1980s. The financial crisis of 1990s has again revealed the severity of capital flight. As far as china is concerned, the problem of capital flight should not be ignores because of the developing and transitional economy of China. More and more capital flight had done harm to our economy potentially. In order to solve hidden trouble, we must study the reason and the countermeasure of the capital flight, and then we can keep the financial stability of our country and promote the health development of China economy.After reading the research works of developing countries and transitional countries as reference, the paper makes good use of the researching results of foreign scholars and pays much attention to the reasons and process of China capital flight specially.Firstly, the dissertation reviews systemically the theoretic model of capital flight and studies several representative theories specially. Then the article summarizes the previous empirical research of the reasons of capital flight.Secondly, this study presents the possible determinants of capital flight in China. We present a Johansen cointegration model based on the dynamic econometric theory. By the cointegration model, we get appropriale long run relationship between capital flight and its determinants. The empirical results imply that the difference between domestic and foreign rate, the foreign debt as a percentage of GDP, the overvaluation of the exchange rate, the discrimination between native and foreign capital, financial control are the main economic forcing factors of capital flight.Last, basing on empirical analysis and the situation of China's economy, the article proposes that the comprehensive measures should be taken for effectively curbing capital flight in China. In order to control and prevent capital flight we should keep domestic economy stable, strengthen the management of state-owned assets, improve corporation government, protect private legal asset, make rational policy about making use of foreign assets and push financial deepening.