The Analyze On The Impact Of China's Capital Account Liberalization On The Stability Of Banking System

Capital account liberalization has become an important way for each country to achieve financial liberalization.Following continuous financial crisis,every country pays more attention to maintain financial stability.Once finance is unstable,banking system,as the lifeblood of the financial system,will be affected first.For instance,Asian financial crisis was caused by banking crisis.China survived in the crisis,thanks to it's management of capital account,so that our country can ride out the financial crisis,and avoid international floating capital flooding the Chinese market.However,with the quicken pace of our country's capital account liberalization,the rapid flow of international capital,will inevitably have an impact on our country's financial stability.Actually,exchange rate fluctuation is one of the most superficial factors caused by a wash of capital inflow.Violent currency swings will produce an impact on the banking system through affecting the scale of bank's asset liability.In addition,a large number of capital inflows will lead to the expansion of bank credit,as well as increase of non-performing asset ratio,which will have a great impact on the stability of the banking system.Although China's capital account is opened late,and has been taking a cautious opening up policy,financial risks remain in the process of capital account liberalization,thus affecting financial stability.In this setting,to do a research on the impact of capital account liberalization on the stability of the banking system is remarkably significant for China to maintain the stability of banking system,to draw on advantages and avoid disadvantages,and to enjoy benefits from capital account liberalization in the process of capital account liberalization.Although China's capital account liberalization has achieved progress,there is still risk in the banking system.Therefore,study the impact of capital account liberalization on the stability of the banking system is both practical and theoretical significance.The study not only can provide a theoretical basis for China's capital account liberalization policy,but also provide reference to decision-making on maintaining financial stability of our country and promote economic growth.In this paper,there is a combination of qualitative and quantitative analysis method used.First,qualitative analysis method.Draw lessons from current economic theory on relevant theories of capital account liberalization and banking system,thus paving the way for empirical analysis of the following parts of the article.Second,quantitative analysis method.After the analysis of the current development of China's capital account liberalization and banking system,by using the methods of unit root test,co integration test and impulse response,I analyze the impact of capital account liberation on the stability of banking system.Meanwhile,pay attention to the combination of theory and practice and ensure the paper is from theory to the practice.Through the study,the following conclusions are drawn:capital account liberation will have an impact on the stability of banking system,whether it is from the respects of credit risk,exchange rate risk or liquidity risk.Credit risk and exchange rate risk will manifest themselves in a short time,while,the performance of liquidity risk is comparatively lagging behind.As the impact of these indicators are different,so are their performances.Possible innovations of this paper:in respect of theoretical analysis and status analysis,adopt the latest data and a large number of charts,using quantitative form.In respect of Index selection,I introduce the exchange rate index on the basis of BSSI index system,which can more comprehensively analyze the impact of capital account liberation on banking system.Due to deficiency of historical data of banking system,my inadequate personal theory study as well as incomplete comprehension on complex econometric models,there are still some deficiencies in this research.For example,the number of indicators selected is too small,in order to match the consistency of the data,select the annual exchange rate as the calculation data,etc.The structure of the article is as follows:Chapter One:Introduction.Clarify the background and significance of the research and discuss domestic and international research results,thus clarifying the thinking and framework of the entire article.Chapter Two:The analyze relevant theories on the impact of capital account liberalization on banking system.Describe capital account liberation as well as the meaning of a stable banking system,and analyze the impact of capital account liberalization on banking system stability thus,providing a theoretical basis for the following parts of the paper.Chapter Three:Situation analysis of the process of Chinese capital account liberalization and the banking system.It describes the process and current situation of China's capital account liberalization as well as current situation of banking system,therefore,laying basis for empirical analysis of the next chapter,making it of more practical significance.Chapter Four:An Empirical analysis of the impact of Chinese capital account liberalization on stability of the banking system.Take the factor of exchange rate in to consideration on the basis of BSSI index system,conduct unit root test,co-integration test and impulse response for data,and analyze the results.Chapter Five:Conclusions and Policy Recommendations.Using the method of qualitative and quantitative analysis methods,come to a conclusion and put forward tactics on maintain the stability of banking system under capital account liberalization liberation.