Capital Account Liberalization : Does Advanced Economy Experience Provide Lessons for China?

The initial post World War II pursuit of capital account liberalization (CAL) by advanced economies was Europe-centric, with roots in a broader political rather than economic agenda of greater European integration. In continental Europe, CAL was addressed mostly through the adoption of multilateral instruments and codes. In contrast, CAL by the United States and United Kingdom was pursued unilaterally, motivated by their status as global reserve currency issuers and global financial centers. China's situation is fundamentally different. China today has no equivalent to the European political motivation for CAL or the domestically driven financial motivation of the United States or the United Kingdom. And while China may have long-term aspirations to be a global reserve currency issuer, the extent to which it internationalizes its currency is constrained by powerful domestic economic and political interests that continue to benefit from an export-led growth model underpinned by a pegged and undervalued exchange rate, both of which are difficult to maintain with an open capital account. Alongside China's overarching concern with the maintenance of financial and economic stability, these factors imply a different path for China than paths taken by advanced economies, with significant acceleration in the gradual pace of liberalization unlikely without accelerated development of domestic constituencies that traditionally support CAL.

Bibliographic Details

Main Author:	Chelsky, Jeff
Language:	English
Published:	World Bank, Washington, DC 2012-02
Subjects:	ADVANCED COUNTRIES, ADVANCED COUNTRY, ADVANCED ECONOMIES, ADVANCED ECONOMY, BASKET COMPOSITION, BOND, BOND MARKET, BORDER CAPITAL FLOWS, CAPITAL ACCOUNT, CAPITAL ACCOUNT CONVERTIBILITY, CAPITAL ACCOUNT LIBERALIZATION, CAPITAL CONTROLS, CAPITAL FLOWS, CAPITAL INFLOWS, CAPITAL MARKET, CAPITAL MARKET LIBERALIZATION, CAPITAL MARKETS, CAPITAL MOVEMENT, CAPITAL MOVEMENTS, CAPITAL RULES, COMMON MARKET, COMMUNICATIONS TECHNOLOGY, COMPETITIVE DEVALUATION, COMPETITIVE DEVALUATIONS, COMPLEX INSTRUMENTS, CROSS-BORDER CAPITAL, CURRENCY BASKET, CURRENT ACCOUNT, CURRENT ACCOUNT CONVERTIBILITY, CURRENT ACCOUNT TRANSACTIONS, DEPOSITS, DEREGULATION, DEVELOPING COUNTRIES, DOMESTIC BONDS, DOMESTIC FINANCIAL SECTOR, DOMESTIC INSTITUTIONAL INVESTOR, ECONOMIC DISRUPTION, ECONOMIC GROWTH, ECONOMIC POLICY, ECONOMIC STABILITY, EXCHANGE RATE, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL FLOWS, FINANCIAL INNOVATION, FINANCIAL INSTITUTIONS, FINANCIAL MARKETS, FINANCIAL SECTOR DEVELOPMENT, FINANCIAL SYSTEM, FIXED EXCHANGE RATES, FLOATING EXCHANGE RATE, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN INSTITUTIONAL INVESTOR, FORWARD MARKET, GLOBAL FINANCE, GLOBAL FINANCIAL CENTERS, GLOBAL FINANCIAL FLOWS, HOLDINGS, INSTITUTIONAL INVESTOR, INSURANCE, INSURANCE COMPANIES, INTERNATIONAL MONETARY FUND, INTERNATIONAL RESERVE, ISSUANCE, LIBERALIZATION OF CAPITAL, LIBERALIZATION OF CAPITAL MOVEMENTS, LIBERALIZATION OF TRADE, MARKET ACCESS, MARKET HOLDINGS, MONETARY FUND, MOVEMENT OF CAPITAL, OPEN CAPITAL ACCOUNT, PEER PRESSURE, PERIODS OF STRESS, POLITICAL ECONOMY, POVERTY REDUCTION, PRIVATE DOMESTIC, PRIVATE FINANCIAL SECTOR, PUBLIC SECTORS, RESERVE CURRENCY, SECURITIES, SECURITIES MARKET, SHORT-TERM CAPITAL, SINGLE MARKET, SINGLE_MARKET, SOCIAL DEVELOPMENT, STOCK MARKET, TRADING, TRANSPARENCY, TREATY, UNILATERAL LIBERALIZATION,
Online Access:	http://documents.worldbank.org/curated/en/2012/02/15822799/capital-account-liberalization-advanced-economy-experience-provide-lessons-china https://hdl.handle.net/10986/10054
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