Capital flow is a large amount of capital flow between countries in order to seek higher returns and better investment opportunities.

cause

① Economic growth and capital supply and demand;

② Difference between interest rate and exchange rate;

③ International division of labor and the further development of specialization and cooperation;

④ Market development potential and investment environment

⑤ Efficiency of economic policies and administrative systems in various countries.

type

(1) Long-term capital (starting new enterprises, acquiring foreign enterprises and reinvesting profits)

① Direct investment

Benefits: introducing scarce resources, increasing GDP, creating demand and employment, improving balance of payments, increasing fiscal revenue, increasing consumer choice, human resource effect and competition effect.

Disadvantages: the cost of squeezing domestic enterprises and attracting FDI.

② Indirect investment: securities investment and international loans.

(2) Short-term capital (trade financing, speculation and hedging)