Study On Capital Flight In China

Capital is very important to the economic growth of an economy. Therefore, China hasadopted the reform and opening-up policy since the late1970s, which attracted a lot ofcapital flew to China, improved the production efficiency, and made China’s economymaintained a high momentum of development. However, while the government tries tointroduce foreign capital by all means, large-scale of capital flights out despite the admissionof monetary authority, being negative to economics growth.In order to calculate the scale of capital flight in China precisely, Chapter2recalls thedifferent definitions and calculation methods of capital flight, compares the advantages anddisadvantages of direct measuring method, indirect measuring method, and Hybrid measuringmethod, and briefly reviews the scales of capital flight calculated by some Chinese scholars.Based on the reality in China, Chapter3calculated the scale of capital flight in China between1987and2010, and analyses the reason why China faced both hot money and capital flight. InChapter4, we analyses the determinants of capital flight by making a stepwise regressionanalysis in an econometric mode, such as the economic growth rate, inflation rate, expectationof currency devaluation, interest rate gap and so on. Finally we find out that the maindeterminants are the expectation of currency devaluation, proportion of foreign debt to GDP,inflation rate, and economic growth rate. At last, we analyze the channels of capital flight inChina, then give some pieces of policy advice for the cure of capital flight.