Research On China's Capital Flight In Transition Period Finance

Capital flight, also known as capital evasion or capital transference ,is seen most commonly in massive foreign capital outflows from a specific country, often at times of currency instability. Sometimes specifically refers to the movement of money from investments in one country to another in order to avoid risks or in search of higher returns. Due to the debt crisis in Latin American in 1980s, capital flight in developing country attracts economists' attention for the first time. In 1990s, Asian financial crisis was also highlighted by the capital flight. For a developing country, although China's international balance of payments showed a net inflow of capital, but the problem of capital flight also can not be ignored. In the new century, particularly since 2002, due to China's rapid economic growth and the expectation of a revaluation of the RMB, massive of hot money enter China for the purpose of speculation. This phenomenon causes an illusion of the improvement of capital flight. Though China's current situation is vary from the Latin American and the Asian's in crisis, and China still has a large scale of inflow of capital, we should also recognize our country's capital flight problem accurately, and pay close attention to it to prevent the crisis.Based on the large number of domestic and foreign literature on capital flight, we define China's capital flight with the economic and financial characteristics in China's transition period. On this basis, we estimate the scale of capital flight by using the universal measurement, and analyze the ways of capital flight in current account and capital account. Meanwhile, in view of China's special economic environment, we raise the factors that caused the capital flight, and furthermore give a brief analysis to this phenomenon: why China's capital flight doesn't cause great harm to the country. Finally, based on the reality of China's reform and the characteristics of capital flight, we propose to prevent capital flight by establishing the monitor mechanisms and strengthening the international cooperation.