The Economic Effects And The Policy Choices Of Capital Liberalization:The International Experiences And The Enlightenments To China

From1980s, some emerging market countries began their capital opening processes in order to promote their outputs. But after1995, the financial crisis has hardly hit the emerging markets in Latin America and Asia and many emerging market countries come to implement different degrees of capital controls. At the same time, the free flow of capital is the inevitable trend of economic globalization especially for Chinese enterprises. Therefore, in order to avoid repeating the mistakes of some emerging market countries and maintain the domestic economy develop in the long run, the extremely urgent problems for China are whether and how to carry out the capital liberalization.The purpose of this study is to analyze the economic impact of capital liberalization and the way and effect of capital control policy, and provide some suggestions for China. Based on the relationship of capital liberalization and economic growth, this paper explore whether capital opening lead to economic growth; secondly, through the three market (money market, capital market, commodity market) price performance, the paper study the flow and allocation of capital in different markets and different departments; then, through the research of capital liberalization and foreign exchange the paper analyzes the relationship between the stability of capital liberalization and economic crisis; then, summarizes the argument of capital liberalization; finally, introduce the current status of China’s capital controls and put forward the corresponding policy recommendations.This innovation is mainly reflected in two processes as follows:First, on whether to process capital opening, this paper extends the neoclassical growth model explain the factors of economic growth rate is the capital openness variable size not the capital openness level. In addition, this paper constructs the small open economy model of economic division and finds that capital liberalization would make such countries gain more in the long run. Finally, we research the relationship between capital liberalization and different markets’ prices and find that capital opening lead to devaluation and lower real interest rates. In addition, there are3channels that differently affect the price.Secondly, in the process of how to realize capital liberalization, we found that if the tfp improved with capital liberalization, the process will not lead to crises; conversely, the probability of happening crisis will increase. In addition, this paper found:controls on capital inflows and outflows are complementary to each other; the interference and efficiency of price controls to the market are both small; long-term regulation requires a larger administrative costs, but discontinuous control can be easily avoided. Then, we establish the wealth accumulation model accounting economic division and find that economic segmentation will reduce the efficiency of macro policy in the process of capital liberalization.China had maintained higher capital controls, so capital liberalization is a new challenge for china. Emerging economies as our country is, we are now at a critical moment of the economic structure reform and economic growth has slowed down. We can stimulate economic growth through capital liberalization, but we must speed up the adjustment of economic structure and make the economic develop in the long-term. In addition, relative to other emerging market countries, China’s economic structure is more complex, economic segmentation phenomenon, such as regional differences and differences between urban and rural, is serious to china. The capital liberalization in the long run can help to eliminate the structural distortions, but the macroeconomic policy near-term challenges are relatively large. Therefore, at the same time China should reduce the differences between regions and industries durning the capital liberalization process. Finally, China should adjust trade structure and strengthen the financial audit of the multinational enterprise, to avoid the failure of capital controls and the increase of external imbalances. We should also improve the efficiency of monetary sterilization, increased financial institution’s ability to resist risks and reform of the exchange rate and interest rate formation mechanism. At the same time, through the wage and price adjustment to eliminate the distortions and promote the upgrading of the industrial structure.