Study On The Impact Of Capital Account Liberalization On The Risk Of Commercial Banks In China

In recent years,China’s capital account liberalization process has steadily advanced,including the relaxation of QFII and RQFII quotas,bond pass,cross-border wealth management pass,Shanghai/Shenzhen-Hong Kong Pass and "Guangdong-Hong Kong-Macao Greater Bay Area" and other policy initiatives,which are conducive to foreign investors to enter the financial markets of stocks,funds and debts,and trade or hold RMB-denominated assets in China’s financial markets.The opening up of the capital account,however,is a major challenge.However,the opening of the capital account is a "double-edged sword" and faces greater risks in the process of opening up.China’s banking industry plays a leading role in ensuring the stable development of the national economy and financial system,and is an important pillar of the economy.As a major financial intermediary,banks provide the necessary financing support for the real economy,and are also an important source of financial stability.The 19th Party Congress identified the prevention and resolution of major risks as the top priority of the three major battles,highlighting the importance of the banking industry.The Second Tenth Report proposed to guard the bottom line of no systemic risk.In this context,it is particularly necessary to systematically study the impact of capital account liberalization on the risk of commercial banks in China.The article starts from China’s national situation,and after combing the relevant literature,it is found that the current research mainly focuses on the impact of capital account opening on banking system risk,its utility on economic growth,and the influencing factors of bank risk,and no unified conclusion has been formed yet.To address the shortcomings of the existing literature,the article explores the impact of capital account opening on the risk of commercial banks in China from the perspective of individual commercial banks,and explores its impact channels,with a view to putting forward corresponding policy recommendations in combination with the research results,and providing references for capital account opening and commercial bank risk management in China.The study is divided into the following parts: first,defining capital account opening and commercial bank risk,and sorting out their measurement methods respectively,choosing Z-value to measure China’s commercial bank risk,and choosing flow indicator method to measure China’s capital account opening.Second,the policy nodes of China’s capital account opening since 1996 are broadly divided into four stages:the opening stage of the capital account opening process,the pilot stage,the steady advance stage and the steady and fast stage,and since 2012,China’s policy regarding capital account opening has entered a new era.Comparing the trend of cross-border capital flow brought by the capital account and the current situation of China’s commercial bank risk,it shows a high correlation,and the risk of China’s commercial banks is lower in the years with lower foreign capital inflow.At the same time,the risk of China’s commercial banks also shows risk spillover effects and heterogeneity.Third,the underlying theory and impact mechanism of capital account opening on commercial bank risk are comprehensively analyzed,and capital account opening affects commercial bank risk through the balance sheet channel and moral hazard channel.Fourth,the data related to the measures of capital account opening and commercial bank risk from 2010 to 2021,as well as the control variables at the commercial bank level and macroeconomic level,are selected for empirical analysis through fixed-effects model and mediating-effects model,and the results show that the capital account opening has a significant positive relationship with China’s commercial bank risk,and bank leverage and asset size also increase China’s commercial bank The results of the intermediary effect regression show that capital account opening affects the risk of China’s commercial banks through the balance sheet channel and moral hazard channel,and the empirical results are consistent with the theoretical analysis.To ensure the reliability of the empirical results,the article also conducts robustness tests by replacing the risk indicators of Chinese commercial banks,changing the estimation method and randomly deleting 10% of the sample,and the results are still significant.Fifth,the main findings of the study are summarized with respect to the article’s research content and empirical results.Then,taking into account China’s national conditions,we put forward targeted policy recommendations to promote the process of capital account opening and the prevention and supervision of commercial banks’ risks in China.In response to the relevant research of the article,the following reference suggestions are made to China’s capital account opening,commercial banks’ operation and management and banking regulators respectively: First,grasp the degree of capital account opening and steadily promote the pace of capital account opening.In the process of capital account liberalization,maintain a prudent attitude,control risks and strengthen supervision,while guiding commercial banks to operate prudently and avoid moral risks,so as to ensure a balance between capital account liberalization and financial risk management.Second,strengthen commercial banks’ risk management capabilities and accelerate banking business innovation.Improve the financial supervision system and achieve precise management.Establish a sound information identification system to prevent information asymmetry and related risks.Third,strengthen the supervision of foreign banks and financial institutions entering the Chinese market and formulate corresponding regulatory policies.Strengthen the supervision of commercial banks’ risk management and internal control,promote the establishment of a sound risk management system,and enhance risk prevention and response capabilities.Adopt a targeted approach to the classification and management of domestic commercial banks.At the same time,supervise and evaluate foreign institutions and guide them to adapt to China’s financial market rules and system.