Research On The Impact Of FDI And Exchange Rate Fluctuation On China's Financial Security

In recent years,with the continuous deepening of information technology,a new wave of large-scale financial globalization has emerged quietly.China has developed rapidly in this wave,and the scale of foreign direct investment(FDI)has been expanding;At the same time,in order to adapt to various changes,China's exchange rate system has also been adjusted accordingly,not only to achieve the reform of the mechanism,but also has a lasting and far-reaching impact on China's financial development.The development opportunities and speed of China's financial industry are constantly increasing,and the degree of opening to the outside world is constantly improving,but the financial risks are also gradually increasing: On the one hand,the increasing degree of opening to the outside world makes the financial risks of other countries and regions pass on to China in various ways,leading to the increase of external financial risks;On the other hand,the rapid development of the financial industry makes foreign financial institutions constantly enter China,while the reform of China's financial management and financial supervision system is slower,and the external competition risk and internal operation risk are constantly expanding.Therefore,China's financial security problem is increasingly serious.To solve the above problems,firstly,this paper proposes a financial security effect model of FDI and exchange rate fluctuations based on principal component analysis(PCA)and Vector Auto-regression Model(VAR).This model consists of two parts: In the first part,a financial security index system suitable for China's actual development is constructed.The number of principal components is extracted through principal component analysis(PCA)method,and the comprehensive score of principal components is obtained according to the expression of principal components.In the second part,VAR model is used to analyze the impact of FDI and exchange rate fluctuations on China's financial security.On the basis of collecting relevant data,empirical analysis is conducted to draw conclusions.Secondly,the main conclusions of this paper: First,FDI has a positive impact on China's financial security and its contribution is on the rise.Therefore,reasonable introduction of foreign capital,optimization of investment structure and improvement of the quality and efficiency of foreign capital utilization are conducive to maintaining China's financial security;secondly,the impact of exchange rate fluctuations on China's financial security has a negative effect,and the contribution is decreasing.If the range of exchange rate fluctuations is too large,China's financial security will be seriously threatened.Therefore,reasonable and moderate exchange rate fluctuations play a positive role in maintaining China's financial security;Third,China's financial security situation is on the rise,but the impact of financial security factors are complex,national financial security issues can not be ignored.Finally,this paper puts forward corresponding policy suggestions from the perspectives of FDI,exchange rate fluctuations and financial security.Firstly,it pays attention to the problem of cross-border mergers and acquisitions in FDI,makes rational and effective use of FDI,and avoids foreign capital controlling pillar industries and enterprises;Second,actively improve the RMB foreign exchange market and actively and effectively manage foreign exchange reserves;Third,to establish and improve China's financial system and formulate financial security policies and standards;Fourth,strengthen the early warning mechanism of financial institutions and improve the internal management system of financial institutions.This paper takes FDI and the financial security effect of exchange rate fluctuations as the main line of research,with two innovations: First,comprehensive consideration of FDI and the impact of exchange rate volatility on China's financial security,combining principal component analysis(PCA)and VAR model study FDI and exchange rate volatility impact is applicable for our country finance security,now using a variety of methods combine FDI and currency fluctuations have a purpose for our country finance security research is less;Secondly,according to the existing literature and the corresponding principles,21 indicators were selected to construct China's financial security index system,and the comprehensive score of China's financial security index was obtained by using the principal component analysis(PCA)method,so as to more comprehensively measure China's financial security situation.These two innovations enhance the accuracy of the description of the impact of FDI and exchange rate fluctuations on China's financial security,and at the same time,expand new ideas for the study of China's financial security.