Abstract: Through principle component analysis, the general factors affecting international capital flows were obtained. Then by dividing the international capital flows into long-term and short-term capital flows, further analysis of the factors was conducted. The results of empirical study show that increased level of openness, increasing economic output, increased labor compensation and moderate inflation may bring in FDI, which can be inhibited by an appreciation of an RMB; increasing expectation of RMB appreciation and a boom of Chinese real estate and security markets are driving short-term capital into China; increased level of openness and interest rate differentials have no influence on short-term capital inflows.

Key words: international capital flows, principle component analysis, co-integration analysis