Economic analysis and empirical study on factors affecting short-term capital flows of China

Speculativeness and instability of short-term capital flows would have an enormous impact on a country\´s financial stability and economic development. The paper summarizes the "push pull" impact of Chinese short-term capital flows mainly is: Domestic and foreign interest-rate spread, expected exchange rate, domestic capital market prices and domestic prices in commodity markets, and gains a profound economic analysis. The paper makes an empirical study on relationship between Chinese short-term capital flows and its impact factors with monthly data from January 2004 to March 2009, and we find that there is a positive correlation between the interest-rate spread, capital market prices, commodity market prices and short-term capital flows, and a negative correlation between the expected exchange rate and short-term capital flows; the expected exchange rate is the greatest contribution of short-term capital flows.