Money and Banking Chapter 14 International Capital Flows and International Financial Markets

1. International capital flows are divided into long-term capital flows and short-term capital flows. Long-term capital flows refer to the cross-border flows of capital with a term of more than one year, including international direct investment, international indirect investment and international credit. Short-term capital flows refer to the cross-border flows of capital with a term of one year or less, including the flow of trade funds, the flow of arbitrage funds, the flow of hedging funds and the flow of speculative funds. 2. The flow of international capital can be traced back to the United Kingdom in the first half of the 19th century. Since the 1970s, international capital flows have developed rapidly, and current international capital flows have shown a series of new characteristics: (1) The scale of international capital flows has grown rapidly and is increasingly divorced from the real economy; (2) The structure of international capital flows has changed rapidly. , and shows the characteristics of securitization and diversification; (3) Institutional investors have become the main body of international capital flows.

3. The main reasons that promote the rapid development of international capital flows include economic, financial, institutional and other aspects. The capital supply and capital demand existing in the international capital market are the economic reasons for international capital flows; the preservation and proliferation of assets and the realization of the best combination of returns and risks through international capital flows are the financial reasons for international capital flows; countries have significantly relaxed financial The intensity of regulation and the gradual opening of domestic bank credit and securities markets are the institutional causes of international capital flows.

4. The extensive and rapid flow of international capital has had a huge and profound impact on the global economy and a country’s economic development. International capital flows are conducive to the realization of global economic integration, financial market integration, and the integration of asset prices and returns in financial markets. When funds flow internationally, they can often exert an impact on a country or even the global economy through specific mechanisms that far exceed its strength. Its amplification effect is specifically reflected in the leverage effect and herding effect generated by international capital flows. International capital flows will also have an impact on economic sovereignty, domestic financial markets and exchange rates.

5. The international financial market refers to a place or operating network where international funds are circulated in accordance with market rules. International financial markets can be divided into different categories based on different market functions, different financing channels, and whether they are separated from the domestic financial system. The international financial market can play the role of providing international financing channels, adjusting the capital surplus and shortage of various countries, regulating the balance of payments, promoting the development of economic globalization, and forming a risk avoidance mechanism.

6. The international foreign exchange market refers to the trading place or operating network where foreign exchange supply and demand parties conduct foreign exchange transactions. The international foreign exchange market is an invisible market in which the types of currencies traded are relatively concentrated, operate continuously in time and space, and are subject to relatively common and frequent government intervention. The main participants in the international foreign exchange market are foreign exchange banks, foreign exchange brokers, foreign exchange traders, customers and the central banks of relevant countries.

7. The main types of transactions in the international foreign exchange market include spot foreign exchange transactions, forward foreign exchange transactions, swap foreign exchange transactions and arbitrage transactions. In the process of financial innovation, new types of transactions such as foreign exchange futures trading and foreign exchange options trading have emerged. A country's economic growth rate, international balance of payments, interest rates and inflation rates, monetary policy orientation and people's psychological expectations are the main factors that affect market prices.

8. The international money market refers to the trading market where the loan period of funds does not exceed one year. It is also called the short-term international capital market. Its function is to provide short-term financing. It mainly includes the bank's short-term credit market, short-term securities market and bill discount market, in addition to the offshore money market.

9. Offshore financial markets refer to financial markets that are separated from the domestic financial system of the country where the market is located and are not subject to the laws and regulations of the country that issues the currency used, nor the laws and regulations of the government of the country where the market is located. . This is a new, modern, truly international financial market. Its characteristic is that it is mainly based on overseas currency lending business among non-residents and is not restricted by any country's policies, regulations, and tax systems. In terms of terms, the offshore financial market can be divided into offshore money market and offshore capital market, among which the offshore money market is the most active.

10. The international capital market refers to the market formed by various capital transaction activities with a term of more than one year in the international financial market, including the international medium and long-term credit market, the international bond market and the international stock market. The international medium- and long-term credit market is a place where the supply and demand sides of funds in the international financial market conduct medium- and long-term credit financing.

There are two main ways of international medium and long-term credit: exclusive bank loans and syndicated loans.

11. International bonds refer to bonds issued by a country's issuer in the foreign bond market, with a face value in foreign currency or European currency and underwritten by foreign financial institutions. There are three main categories of international bonds: foreign bonds, European bonds and global bonds. The issuance and circulation of the above three types of bonds form the foreign bond market, the European bond market and the global bond market respectively.

12. International stocks refer to stocks issued by non-resident joint-stock companies where the stock market is located. It is a tool for issuers to raise long-term funds in the international capital market. The international stock market refers to a place where market participants engage in international stock issuance and circulation. The international stock market in a narrow sense is the market formed by the stocks of non-resident companies in the place where the trading market is located; the international stock market in a broad sense also includes the international stock markets of various countries.