As a bridge between global financial links, cross-border capital flows have a positive impact on the alleviation of domestic financing constraints, the improvement of resource allocation efficiency, and the formation of a new development pattern of dual circulation. However, we must also be fully aware that large cross-border capital inflows and outflows can exacerbate the fragility and volatility of the domestic financial system.
Therefore, while taking advantage of the opportunities brought by cross-border capital flows, it is necessary to attach great importance to their potential risks and take effective measures to manage and prevent them.
China's financial openness continues to expand
Cross-border capital flows may have multidimensional shocks to the domestic financial system, especially in the current complex and volatile external environment. This poses new challenges for financial regulation. In the 14th Five-Year Plan, China clearly stated that it is necessary to "improve the management framework for cross-border capital flows, and improve the ability to prevent and respond to risks under open conditions".
At present, China's financial opening has entered a new stage of development, and the cross-border capital flow channels have been continuously broadened and the scale has been rapidly improved, which has also brought corresponding benefits to China.
In addition, volatile cross-border capital flows can become part of the pro-cyclical and financial accelerator of the real economy under certain conditions, and may even trigger global turmoil, increase the likelihood of a financial crisis, and become one of the factors that trigger systemic risk. The example of the Asian financial crisis of 1997 vividly illustrates this point.
Considering that the frequent cross-border capital flows have become an important factor affecting financial stability, how to effectively manage and regulate cross-border capital flows has become a global problem, and the background and research significance, research framework and main contents, research methods adopted and possible innovations are discussed in turn.
Since 2014, China has successively launched the "Shanghai-Hong Kong Stock Connect" and "Shenzhen-Hong Kong Stock Connect" mechanisms, and subsequently abolished the investment quotas for qualified foreign institutional investors and RMB qualified foreign institutional investors.
Financial opening-up can inject new vitality into the country's financial system, strengthen the function of financial services for the real economy, and provide endogenous impetus for accelerating the construction of a new development pattern.
However, as financial openness expands and deepens, we need to pay attention to the risks and challenges it may bring. In the process of promoting financial opening-up, we need to strengthen regulatory cooperation, improve risk prevention and control mechanisms, and ensure financial stability and security.
Cross-border capital flows will become one of the important factors affecting domestic financial stability, and the expansion of cross-border capital flows and the increase in volatility, as the most direct manifestation of financial opening-up, will have a non-negligible impact on financial stability. Cross-border capital flows lead to the convergence of countries' financial cycles, which will squeeze domestic macroeconomic policy space and weaken regulatory capacity.
In addition, this situation may also trigger the resonance of domestic and foreign capital markets, further exacerbating the cross-border contagion of financial risks. According to international experience, cross-border capital flows are the trigger or even the root cause of financial crises in many countries. When there are large-scale cross-border capital inflows and outflows, they have a shock to the financial system and threaten economic and financial stability.
Effective risk prevention is an important prerequisite for China to continue to expand financial opening-up, and grasping the logic and mechanism of cross-border capital flows affecting financial stability is the key foundation for preventing cross-border capital flow risks.
The international economic environment is volatile
China has faced cross-border capital flow shocks many times: after the international financial crisis in 2008, developed economies successively launched quantitative easing policies, resulting in a flood of global liquidity, and the scale of China's cross-border capital inflows has expanded rapidly.
In 2015, due to the spillover impact of the monetary policy shift in developed economies, China's domestic capital flowed out rapidly from different channels, and cross-border capital turned from the previous continuous net inflow to a phased net outflow.
In 2020, the epidemic of the century and the changes of a century are intertwined, and the developed economies once again pinned their hopes on loose monetary policy for the task of reviving the economy, and China's monetary policy took the lead in returning to normalization.
Since 2022, under the superposition of multiple factors such as the extension of the epidemic impact front, the Fed's aggressive interest rate hikes and risks, China has faced certain capital outflow challenges, and the foreign exchange market has also experienced greater volatility.
China's cross-border capital flows are increasingly characterized by huge scale, increased volatility and shortened fluctuation cycle, so it is extremely necessary to fully grasp the potential risks brought by cross-border capital flows and explore corresponding prevention strategies.
At present, the external environment facing China is changing rapidly, the world economic recovery is intensifying, the global economic downturn and high inflation coexist, the Federal Reserve urgently tightens monetary policy in response to rising inflation, the global risk appetite has fallen rapidly, the US dollar index has risen sharply, and the pressure of China's cross-border capital outflow has been highlighted.
At the same time, the revival of the domestic economy in the post-epidemic era is still facing huge challenges, with demand contraction, supply shocks, weakening expectations and other serious constraints on the recovery of the real economy, and the fragility of the financial system still exists.
The stock risk has not been completely cleared, the financial risk points are wide-ranging, the stability of the financial system has been greatly tested, and the monetary policy space is also constrained by inflation and the Fed's interest rate hike to a certain extent. From the perspective of the internal and external environment, it is urgent to be vigilant against the superposition and resonance of external adverse shocks and domestic risks, and China's cross-border capital flows have fluctuated greatly recently due to the external environment.
To some extent, this poses a challenge to financial stability. The topic of cross-border capital flows and financial stability is often mentioned and evolving, but it still requires great attention in the current context of frequent unexpected external shocks.
In the 2022 ** Economic Work Conference, it was once again emphasized that it is necessary to strengthen the financial stability guarantee system and effectively prevent and resolve major risks.
All of the above reflects the importance of maintaining financial stability, highlights the significance of the times in maintaining financial stability, and earnestly maintains financial stability, which has become the top priority of China's financial supervision. Therefore, in the process of financial opening-up, it is necessary to emphasize the control of risks and balance the relationship between openness and stability. In the 14th Five-Year Plan, China's administrative authorities clearly stated that they should "improve the management framework for cross-border capital flows, and improve the ability to prevent and respond to risks under open conditions".
In order to achieve this goal, we first need to have a deep understanding of the impact mechanism and channels of cross-border capital flows on financial stability, and on this basis, explore effective regulatory policies to resist the impact of cross-border capital flows and prevent the risks brought about by the large inflow and outflow of cross-border capital.
In recent years, China's battle to prevent and resolve financial risks has achieved important phased results, and the overall financial risks tend to converge, but in the face of complex and changeable internal and external economic situations, China's financial stability still faces many risks and challenges, and the fragility of the financial system still exists. In the context of deepening financial opening-up.
The large inflow and outflow of cross-border capital will have an increasingly extensive and profound impact on China's financial system, and the difficulty and risk transmission make cross-border capital flows a key factor affecting financial stability. This paper takes the characteristics of synergistic fluctuations of cross-border capital flows as the starting point of this study, and depicts the global coordination and regional linkage of cross-border capital flows.
It not only helps to identify the fluctuations of cross-border capital flows** and grasp the internal logic of cross-border capital flows, but also helps to gain insight into the sensitivity of cross-border capital flows to external shocks, so as to provide evidence support for the necessity and urgency of paying attention to cross-border capital flow shocks in the current turbulent international economic environment.
At present, the overall operation of China's financial system remains stable
However, the operation and performance characteristics of various components within the financial system are not the same, and due to the heterogeneity of the natural attributes and development degree of each component of the financial system, the role of cross-border capital flows in the risk generation, evolution and accumulation of various components of the financial system is also quite different.
Systematic understanding of the financial risks that may be caused by cross-border capital flows in the process of expanding financial opening-up has important theoretical significance, practical value and policy enlightenment for preventing and resolving external risks, correctly handling the relationship between openness and stability, and solidly promoting "financial stability". Therefore, we will comprehensively examine the intrinsic relationship between cross-border capital flows and financial stability from multiple dimensions, and analyze the impact mechanism of cross-border capital flows on the stability of the foreign exchange market, the ** market and the banking sector.
It not only refines and enriches the research in this field, but also serves as a way and channel for cross-border capital flows to affect the stability of the financial system, which is helpful to deeply understand the impact mechanism of cross-border capital flows on financial stability.
At the same time, it will also help to clarify the diversification risks that may be caused by cross-border capital flows in different areas of the financial system, and then have guiding significance for monitoring financial risks from multiple dimensions and formulating targeted policy measures. With the deepening of China's financial openness and the continuous improvement of the marketization of exchange rates, cross-border capital flows are increasingly closely related to the foreign exchange market.
As one of the important channels for external risk input, the foreign exchange market is an area that needs to be focused on to maintain financial stability. To this end, this paper analyzes the mechanism of cross-border capital flows on the stability of the foreign exchange market from the perspective of foreign exchange market pressure, and analyzes the role of different types of cross-border capital flows in the formation of foreign exchange market pressure.
In-depth exploration of the nonlinear and asymmetric effects of cross-border capital flows on the foreign exchange market pressure can not only deepen the understanding of the impact of cross-border capital flows on the stability of the foreign exchange market, but also provide solutions for reducing the foreign exchange market pressure caused by cross-border capital flows, which has policy reference value. The market is one of the most risk-prone financial markets.
It is also easy to transmit risks to all parts of the financial system and cause systemic risks, so it is necessary to pay attention to the multiple impacts of cross-border capital flows on market stability. This paper analyzes the nonlinear effects of cross-border capital flows on market volatility under different market conditions from the dual perspectives of market volatility and market input risk.
At the same time, it captures the nonlinear mechanism of cross-border capital flows on market import risks, which not only helps to comprehensively understand the role channels of cross-border capital flows on market stability, but also points out the direction for preventing imported risks and inhibiting cross-border contagion of market risks, which has strong practical significance. Banks are an important hub of the financial system.
It is also an important transmission intermediary of macroeconomic policies such as monetary policy, and the changes in the risk attitude and behavior of commercial banks are directly related to the sound operation of the financial system.
Conclusion
In view of the fact that grasping the risk-taking behavior of banks is the key to preventing financial risks and maintaining the stability of banks, it will be based on the risk-taking behavior of banks.
On the basis of theoretical analysis of how cross-border capital flows act on bank risk-taking, this paper examines the impact of cross-border capital flows on banks' risk-taking from the perspective of micro individuals and the industry as a whole, so as to explain how cross-border capital flows affect bank stability, which can not only make up for the shortcomings of relevant literature and theoretical research, but also provide decision-making reference for improving the macro-prudential policy framework.