The Motivations of International Capital Flow in China

摘要

By extending the portfolio theory, this paper tries to measure the motivations of Chinese international capital flow. The exchange rate of RMB, Chinese interest rate and return of capital market are the most important motivations of international capital flow. The institutional change is not significant indicates that the international capital has already found some other flowing channels. Under the expectation of high benefit, international capital will keep flowing without considering the authority. Vector Autoregression (VAR) model indicates that benefit of RMB appreciation is the initial motivation of short-term international capital. The governance of international capital flow should focus on the flowing motivations and channels rather than establishing some strict regulations. Diminishing the expectation of excess benefits on Chinese investment is the best way to decrease negative impacts of international capital flow. Appropriate solutions to the capital flow will increase the independent of monetary policy and control the high inflation rate.