The volatility of international capital flows have further increased both in volume and speed since the outbreak of subprime crisis originating from America. Orientation of international capital flows blurred because of the downward expectation on the growth rate in main countries. Since the short-term capital flow has gradually become an important part of international capital flow in China in decade, the volatility of short-term capital flows may affect the development of Chinese economy severely. A structural model-VECM was build to explore the determinants of net flows of short-term capital in China. The conclusions of this study were that net flows in China are largely determined by estate price, circulated stock value, expectation on exchange rate and interest rate. On that basis, some policy suggestions were proposed.
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