The Analysis Of Capital Account Liberalization's Economical Effect On Unbalance Economy Circumstance

The capital account liberalization is a issue which a country must face when its economic development reaches a certain level. It is the need to integrate the world economy, trade and the need of the free convertibility of RMB. The capital account liberalization can further optimize the allocation of resources, improve the market economy system, make up for the lack of domestic capital through the inflow of foreign capital . In view of many benefits of the capital account liberalization, China began the gradual opening of capital accounts process. Although its capital account was not completely open, its openness improved significantly. The capital account liberalization is not all smooth sailing, there are many risks. Empirical studies show that the capital account liberalization effects on economic growth are related to the role of a country or a region's economic development progress. The opening of the capital account facilitate the economic growth to the developed countries or regions and prevent the economic growth to the developing countries or regions.At present, China is a developing country which regional economic development level is quite uneven, especially Xinjiang and Shanghai, the differences in total GDP, per GDP, fixed asset investment, financial development are quite significant. In the conditions of uneven economic development, analysising China's capital account liberalization's differentia economic effect is the focus of this paper.The paper uses theoretical analysis, comparative analysis and empirical analysis method study the relation of China's capital account liberalization and regional economic development from a regional economic perspective. It Comes to a conclusion that the opening of the capital account's economic effect is quite different between Shanghai and Xinjiang. The capital account liberalization improves the Xinjiang's FDI growth but fails to promote Xinjiang's total foreign investment. Empirical analysis also come to a conclusion that there is a crowding - out effect to fixed asset investment in Xinjiang to use of the foreign investment. The analysis also shows that while the use of the foreign investment promotes regional financial deepening, but Xinjiang's financial deepening has failed to promote its economic growth. Therefore the capital account liberalization is unrelated to the economic growth in Xinjiang. The analysis of the Shanghai shows that the Capital account liberalization promotes the improvement of the city's economic growth. Liberalizing the capital account not only promotes the use of foreign investment in Shanghai but also through the external role promotes the city's investment in fixed assets and the deepening of finance, thereby promotes its economic growth. The reason of difference is the non-equilibrium initial economic level between Shanghai and Xinjiang.