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 ad...
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| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2012/02/15822799/capital-account-liberalization-advanced-economy-experience-provide-lessons-china http://hdl.handle.net/10986/10054 |
| Summary: | 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. |
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