Research On Domestic Stock Market's Impact By Changes Of Cross-border Capital Flows

With the rapid development of Shanghai free trade zone, continuous growing size of RMB offshore market and increased level of opening of domestic capital market, China's cross-border floating capital has shown a new structural feature at the presence of "double deviation" situations between both trade surplus and growth of reserve assets, and local-foreign currencies interest margin and flow direction of cross-border capital. The paper analyzes the changes in China's cross-border capital flow from three aspects of currency structure, maturity structure and investment orientation structure, among which, currency structure has shown its increase in proportion of RMB flow scale; the short-term capital in the maturity structure has been enlarged and gradually exceeded the size of long-term cross-border capital to guide the trend of cross-border capital flow; and the changes in investment orientation structure is reflected in that domestic capital market, especially the stock market, has increasingly become an active platform for cross-border capital flow arbitrage. In order to study the size of impact of cross-border capital flow structure changes on China's stock market and analyze the characteristics of the differentiated fluctuation in different sectors of the stock market, the paper, in terms of theory, has explained the motivation and principle of cross-border capital flow by classical model and interpreted how the cross-border capital flow structure changes affects the mechanism of stock market through money supply. With respect to the current situation, it has described the changes in three structures of cross-border capital flow and the current situations of the main board market and the growth enterprise market in stock market in detail. The paper carries out empirical studies based on Structural Vector Auto Regression model (SVAR) with the cross-border capital flow structure indicators selected to represent currency, maturity and investment orientation as well as the Shanghai (securities) composite index and GEM index. And the result shows that in the current cross-border capital flow, the increase in size of short-term cross-border capital flow and changes in capital flow invested in stock market have exerted a little influence on stock market, because the impact on global economy generated by the short-term cross-border capital flow has led to certain control measures taken by each country and the restriction on cross-border capital flow into China's stock market has resulted in China's stock market not significantly affected by changes in investment orientation structure. Instead, the increase in size of RMB cross-border trade settlement capital in currency structure has a greater impact on China's stock market compared to the maturity structure and investment orientation structure. Furthermore, changes in currency structure have exerted more significant influence on GEM than on main board market. Due to China's encourage in offshore market development at present and the entering into a substantive stage of RMB internationalization, changes in currency structure have played a most significant impact on China's stock market while differences of scale volume and characteristics between the main board market and GEM in turn determine that the impact of currency structure is greater on GEM than on the main board market. At last, the paper proposes that China shall appropriately strengthen the macro-control and financial regulation to prevent and eliminate the financial risks in the progress of capital account liberalization and enhance the risks prevention and supervision of stock market, including supervision and risks prevention for securities companies and listed companies.