Terminalcables

In recent years, how to measure of China's domestic liquidity become a hot topic. At present the central bank's monetary policy target has been from the middle of the M2 expands gradually to the social total financing, but social total didn't include short-term financing international capital flows. Although the domestic currency credit policy change is China's domestic liquidity has been the main reason for the variation of, but in order to put the liquidity of the story more adequately, tracking short-term international capital flow condition is very necessary.

From the data availability and the characteristics of simple calculation, we use the 'monthly combines incremental foreign exchange goods monthly trade surplus-monthly actual use of FDI' method to estimate the monthly short-term international capital flows, calculated in February 2005 to July 2011 flow condition as below. Since the 2007 summer since the outbreak of the us subprime mortgage crisis, China has experienced three times of large scale international capital flows into short-term. For the first time in January 2008 to July 2008, short-term international capital for seven straight months into China, accumulative total inflows of $218.8 billion, the average monthly into $31.3 billion; For the second time in September 2009 to April 2010, short-term international capital eight months into China, accumulative total inflows of $164.7 billion, the average monthly into $20.6 billion; For the third time in August 2010 to June 2011, short-term international capital for the 11 months into China, accumulative total inflows of $331.5 billion, the average monthly into $30.1 billion.

It is worth noting that, in recent months, short-term capital inflows present international scale declining of MLB hats power. Monthly short-term capital flows into international in January 2011 after the peak value of $59.5 billion, present a concussion descending trend. In May 2011, is still as high as $35.6 billion capital inflows, and in June, 2011, fell to $7.7 billion in July 2011 and even into $5.8 billion to seep out.

Why recent short-term capital inflows slowed, international pressure even may again into trend out? The main reasons include: first, the European sovereign debt crisis erupted again lead to an international financial market turmoil intensifies, international institutional investors significantly reduced their global risk assets, will be a lot of money into the Treasury bond market, this leads to present a short-term international capital from emerging market countries collective withdraw pattern. At present the Greek crisis increasingly fierce, the sovereign debt crisis have from the euro zone countries to outer core countries the trend of conduction, save the city policy can't reach agreement, leading investors to reduce risk preference, 'safe haven' effect caused from global short-term funds to the Treasury bond market backflow, China is also GaiMoNengWai. In fact, the last two international capital outflow of short-term for all and international financial market turbulence on increased: one in the second half of 2008 lehman bankruptcy caused by the financial tsunami period, another in the second quarter of 2010, the European sovereign debt crisis first broke out period;

Second, attracting short-term capital inflows of China international most incentives are deteriorating. First, China's CPI year-on-year growth rate since August 2011, showed a trend of decline this means that China's currency policy tightening cycle is complete, China's central bank raised interest rates again the possibility of decline, China and the United States continue to reduce the probability of widening spreads; Second, China's real estate market of snapback hats macroeconomic regulation continue, at present the big cities, the volume of commodity house marked atrophy, cut the price trend are forming; Thirdly, the monetary policy tightening and flagging confidence influence, China's stock markets are still in the downward adjustments; Fourth, including PMI, value added of industry and generating capacity, the many index shows that China's economic growth momentum is down. The only positive factor is in recent months the yuan to the dollar exchange rate appreciation obviously enlarged.

Short-term capital inflows slowed or international to flow out, for China's economy is expected to cause the following influence: first of all, the foreign exchange reserves growth slow it down, leading to the central bank sterilisation pressure decreases, this means that central Banks continue to future reserve-requirement ratio of probability down; Second, China's domestic liquidity conditions continue to tightens, government deflating monetary policy effect will strengthen, which helps to continue to curb inflation, but will also aggravate the financing difficulties of small and medium-sized enterprises; Again, asset market demand falling, this can cause a asset prices further down. Some time ago to B share market slump may be short and international capital inflows in June and July slows significantly related. The real estate market of macro-control effect will also increase.

The rest of the expected in 2011 several months, short-term international capital may keep out or in small or enter the flow between the pattern of the oscillation. Capital into the pressure decline will improve the effectiveness of the central bank's monetary policy, at the same time, reduce the RMB exchange rate appreciation pressure. The Chinese government should seize the favorable time, speed up the process of national economic structural adjustment, to the next round, laying a solid foundation for growth.