A Study On The Effects Of International Capital Flows In China

In the21st century, the most notable features of world economic development isthe international capital flows on a large scale across the border, many emerging marketcountries have become the international capital importer. China, as the biggestdeveloping country, with the rapid growth of the economy and the continuousimprovement of investment environment, a large amount of foreign capital begin toenter Chinese market, all those has had a profound impact on the international balanceof payments of our country.Mass influx of foreign capital promote the economic development of China to acertain degree, but it also brings a lot of negative effects. such as resulting in doublesurplus of balance of payments in a long term, causing the pressure of RMBappreciation, which affects the implementation effectiveness of China’s monetary policy.In order to explore the various effects of international capital flows, this paper combinedthe theoretical analysis and empirical analysis research methods, mainly divided intofour parts to explore. The first part introduces the relevant theories and effect model ofinternational capital flow in different historical periods, which sets the stage for thefollowing analysis. The second part summarized the in-bound and out-bound foreigninvestment from1949to now, analyzed the present situation of the capital flow in totalamount and structure. The results show that foreign capital inflows in China isincreasing in recent years, the capital flow shows a two-way trend, the size of FDIinflows is growing, the way of capital flow presents a tendency of diversity. The thirdpart established econometric model on the theory of econometrics to study the effect ofinternational capital flows. As you can see, the inflow of foreign investment promotednot only the growth of the economy in our country, but also promoted the developmentof foreign trade, however, this caused many negative effects，increased inflationarypressures and affected our country’s money supply. The fourth part analyzed the riskstatus of capital flows in China, what’s more, combined with the present situation of ourcountry, this paper put forward policy suggestions of capital flow management andthink our country should keep moderate amount of capital flows, improve the efficiencyof capital utilization, perfect the system of capital market and strengthen the supervisionof capital flows, so we can effectively avoid the risks of international capital flows.