The Impact Analysis On China’s Capital Account Opening And Financial Security

During the period of reform and opening up, in order to develop the domestic economy, China had opened current-account promoting the growth of international trade and China’s rapid economic rise. But in recent years, China has carried on opening capital account which has been designed long ago, and regard it as China’s major steps changing from economic giant to economic power. In today’s globalization, a country’s economic development has hardly been isolated from the global economy, the relationships between countries become more closely. The issues related with capital account openness has been the core topics in the international economic cooperation conference. One economic must face it and take it seriously, after all the capital account control is becoming more and more not adapted to the new economic situation.The capital account openness means the freedom of international capital inflows and outflows, it can be a signal that the economics has been mature in utilizing the foreign capital. However, the capital account openness also means that the capital flow will be in ups and downs, threatening the stability of the financial system, which calls for higher requirements for macroeconomic, financial system and the regulatory authority. Southeast Asia financial crisis gives warnings of possible difficulties in opening capital account and capital account opening if the reform not being properly handled, that it may threaten a country’s economic and financial security, even results in the form of the financial crisis. As an important part of economic security, Financial security has become an inevitable issue of discussion in China’s economic globalization. Then how does China’s capital account liberalization affect the financial security? For China how to maintain financial security and financial system in the capital account liberalization?Researches on capital account liberalization and financial discussion have already been quite a few, but studies analyzed the relevant link between the two are rare. Financial security covers all aspects of finance, the connection between the two is profound. In case of capital account liberalization, in order to confirm benefit maximization and risk minimization, it is necessary to thoroughly consider the impact on financial security.Firstly, On the basis of summarizing the predecessors’ research, this paper defines the capital account liberalization and financial security, and clarifies the relevant concepts from the perspective of understanding. Secondly, explains the effects of capital account liberalization on financial security from respective of micro finance and macro finance. In the fourth chapter, using descriptive method discusses the relationship between the two combining with the actual situation of China’s capital account liberalization and the historical data of each branch. Thirdly, builts China financial security index by Principal Component Analysis, long-term cointegration analysis on China’s financial security and capital account openness finds that there is a positive relationship between the two parties. Finally, on the basis of preceding parts, put forward targeted countermeasures as to how to maintain financial security in China’s capital account liberalization.