Abstract

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Title:: Abnormal Cross-border Capital Flows in China：Monitoring，Driving Force and Countermeasures

Keywords:: abnormal cross-border capital flow; Order Choice Model; supervision

Abstract:: Abnormal cross-border capital flow in China not only relates to China’s economic and financialsecurity，but also affects the future international economic landscape. By monitoring abnormal cross-bordercapital flow in China，we found that the frequency of abnormal flow increased asymmetrically. An analysis ofthe data by using the Order Choice Model shows：exchange rate arbitrage is the main motivation for abnormalcapital flow；higher interest rates in China stimulate the risk aversion of investors and induces abnormalcapital outflow；and the changes in import and export data reduce the detectable abnormal cross-border capitalflow significantly. Such hypotheses are falsified as the fluctuation of China’s stock market，the slowdown ofeconomic growth and the tightening dollar liquidity trigger capital flight. Foreign currency loans have the effectof increasing the probability of capital flight，though it is not significant. Domestic and international economicand financial factors have asymmetric impacts on the abnormal cross-border capital flow. We should focus onthe abnormal capital flow and alleviate the pressure of capital flight by stabling interest rate and exchange rateexpectations through structural monetary policy and intervention，monitoring the change in the trade data andforeign currency loan balance，plugging up loopholes and improving financial supervision.