Study On The Effectiveness Of China's Capital Controls

In the case of remarkable finance reform in Tianjin BinHai new areas in 2006, the relaxing of capital controls in China has made an outstanding progress. At the same time, India has also published its five-year blueprint of capital account liberalization. In fact, capital account liberalization has been a hot issue since 1990s', the domestic and international academe take it as a reconsidering problem after the Asian finance crisis. Therefore, under the background of speeding up the capital account liberalization recently in China, it's an urgent question how China flexibly takes capital controls to avoid crisis and realizes capital account liberalization.The paper takes capital controls as a major study item from the perspective of the effectiveness of capital controls. After finding the reducing of effectiveness of China's capital controls, it shows the necessity of capital account liberalization, and gives a blueprint for the detailed principles and steps. The below is the mainly idea. Firstly, it discusses the basic theories of the capital controls, then a cost-benefit function of capital controls is deduced from the economics of government controls, it depicts the present situation of capital controls in China and gives the appraisal. Secondly, based on the relative literature, it builds a system of measurable indexes for China research, after quantitatively and qualitatively analyzes the intensity of capital controls in China, it gives the conclusion that the capital controls in China is rigid to a certain extent. Thirdly, it summarizes the measurable standards of intensity of capital controls to find some appropriate standards for China, which pay more attention to the effect on the macro economy variables. Additionally, it analyses the effectiveness of capital controls in the perspective of the dependency of monetary policy, the stability of exchange rate, the situation of capital flow and the balance of payments individually. Finally, on the conclusion of the decreasing effectiveness of capital controls in China, it demonstrates the necessity of capital account liberalization, then gives a detailed plan based on the principle for the capital account liberalization.