A Research On RMB's Free Convertibility Under Capital Account

To blend Chinese economy with the world's economic tide, China must fulfill the process of making Renminbi (RMB) a currency freely convertible under capital account, being a global hard currency. This goal is a requirement of world's economic and financial globalization. Since the official announcement of acceptance of the Article No. 8 in the Agreements of International Monetary Fund (IMF) in the November of 1996, China's monetary reform has basically entered into a stage in which RMB can be freely conversed under current account. Now the enforcement of RMB's convertibility under capital account has become the only way towards its globalization and the crux of its globalization as well. With China's access into WTO and the deepening of financial structural reforms, the issue of free convertibility of RMB under capital account has become an important topic presented before us.In view of the strict foreign exchange control under capital account in China, firstly, Chapter I provides a survey of capital flow control and free currency conversion of developing countries. And the following aspects are set forth in this charter: a) the contents of capital control; b) the purposes of capital control; c) recent situation of capital control; and d) the essential conditions of calling off capital control. This is a foreshadowing for exposition on RMB's free convertibility under capital account. Further, a brief comparison about the action of currency free conversion under capital account among different types of countries is given so as to use their successful or unsuccessful experience in this field. Then, in Chapter II, the exposition turns to focus on various aspectsabout RMB's free convertibility under capital account, including its necessity, prerequisites, potential benefit, potential risks, and present advantageous conditions as well as disadvantageous factors, so as for finding out correct steps of implementation and formulation of coordinated policies. In Chapter III, the last one, the author gives a summary and an additional statement of the conditions under which the implementation of RMB's free convertibility under capital account could be carried out, interprets its enforcement steps, and expounds the policies and their coordination required by the implementation of RMB's free conversion under capital account.