Abstract
Capital controls proved useful for the central planning system, but the growing adverse effects make the reform inevitable. Early reform efforts were focused on relaxing restrictions on foreign exchange availability and embracing for market forces, which led to the establishment of Chinese currency's on the current account in 1994. The Asian financial crisis disrupted this process. China recently has quietly re-launched this reform. The new measures are directed at loosening up controls over capital account transactions to achieve so-called fundamental convertibility with full on the current account but conditional on the capital account that allows free long-term capital flows but restricts short-term capital flows. The recent reforms feature a strategy of selective liberalisation and China is making progress in reducing the intensity of controls, particularly controls on capital outflow. A new regime has emerged under which transactions in most international assets are freed though a number of capital transactions remain regulated. Meanwhile, China has pro-actively promoted international use of Chinese currency. These developments suggest the beginning of the end of capital controls in China.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.