China's Non-fdi Capital Flows Research

International capital flow has always been a double-edged sword for the global open economy:on one hand,long-term and stable international capital inflow is conducive to a country's economic growth and stability because it constantly provides liquidity to the country's market;on the other hand,short-term international capital flow will exert serious impacts on a nation's macroeconomic environment if its speculative activity causes disruption on the nation's financial market and spread to the real economy,the 1997 Asian Financial Crisis is a lesson drawn from this.As part of the international capital,the Non FDI is especially worth of notice,which has a higher liquidity and more complicated flowing mechanism as well as a closer connection to hot money and capital flight.Therefore,the interaction and influence between the change of a nation's Non FDI flow and its domestic financial market and real economy,is the problem which a open-economy country must face in the process of macroeconomic control to realize its economic growth and stability.In recent years since china joined the WTO and gradually opened its financial industry across the board,the Non FDI capital flow of China has become increasingly connected to China's macro economy.In the period between 2003 and 2007 when Chinese economy enjoyed a rapid growth and gradually became heated,the Non FDI capital flow of China reverse from outflow to inflow and got increasingly higher in its amount each year,therefore there came a big concern about the liquidity surplus and asset price bubbles which might be caused by a great amount of hot money inflow. Meanwhile under the pressure of sterilization,China's monetary policy control is also challenged by the disequilibrium from both inside and abroad.Since the international financial crisis broke following the subprime mortgage in American,China's macro economy is now facing the risk of down or even recession,at the same time the Non FDI inflow of China also shows a slow down and then begins to flow out,which causes a public worry of capital flight.Hence,the Non FDI flow of China not only reflects the state of international capital flow in China,but also shows some relations and mechanisms between the external shock and China's domestic macro economy and monetary policy control.An analysis to these is undoubtedly conducive to a better understanding of the problems of China's open economy and monetary policy control; moreover it could serve as a useful reference to the research of china's macroeconomic stability as an open economy.However,there is a lack of reference of China's Non FDI among the current literatures and even an empty of research devoted to it.Therefore,this paper sets a systematic frame to study the problem caused by China's Non FDI capital flow such as the arbitrage of speculative capital and the difficulty of China's monetary policy control.Integrated with the macro and micro economic theory and econometric methods,this paper first explains clearly the content of Non FDI and its influencing factors,and the try to use the adaptive expectation theory and time series model to analyze the arbitrage mechanism and the effects from China's Non FDI flow to its monetary policy control.According to these theoretical and empirical studies,the paper finally focus on China's monetary policy control in recent year,and discuss how to harmonize the relationship between China's Non FDI flow with its monetary policy control in a framework of the Credit view of monetary policy.This paper is composed of five chapters.The 1^st chapter introduces the research background,significance and its difficulties.Then briefly review the current researches on this problem.The 2^nd chapter gives out the definition of Non FDI and its differences with hot money and capital flight,and analyses its influencing factors. The 3^rd chapter establishes two kinds of econometric models and uses the data related in China to study the arbitrage problem of the Non FDI flow in China.The 4^th chapter does some empirical works to analyze the effect from China's Non FDI flow to its monetary policy control.The 5^th chapter combines china's monetary policy control in recent years and discusses the policy implication of our research on the choice of china's monetary instruments.