Abstract: Understanding the impact of internal and external uncertainties on cross-border bank capital flows and their mechanisms holds great importance in the prevention and control of financial risks in the new era. Based on 224 variables at 18 levels, this paper constructs an economic and financial uncertainty index of China. Then it investigates the impact of internal and external uncertainties on cross-border bank capital flows by taking China as a recipient country. The findings show that, firstly, the global impact of economic and financial uncertainty from the United States will suppress the cross-border bank capital inflows to China, and this impact is even more severe during the tightening period of the Federal Reserve’s monetary policy; secondly, the uncertainty of China’s economy and finance will help to promote the withdrawal of cross-border bank capital by exacerbating market panic, which is manifested as a hedging mechanism, and it will suppress cross-border bank capital inflows by affecting the relative returns of debt assets, which is manifested as a profit seeking mechanism; thirdly, under the influence of internal economic uncertainty, the higher the level of financial development in the reporting country, the less capital withdrawal from cross-border banks; fourthly, under the system of higher economic uncertainty in China, the external uncertainty has a significant impact and strong sustainability on cross-border bank capital inflows. In light of these findings, it is recommended that the government should effectively identify the source and types of uncertainties to enhance the cross-border capital monitoring system, enrich the cross-border capital regulatory toolbox based on different transmission mechanisms of uncertainties, and bolster the internal driving force and resilience of economic growth in China, so as to cope with the superimposed effects of multiple uncertainty shocks.

Key words: economic uncertainty, financial uncertainty, cross-border bank capital