Theoretical Thinking And Practical Proposals On China's Capital Account Liberalization

With the development of economic liberalization and market integration to speed up the process of capital account liberalization of the international financial system has become an inevitable trend. The realization of the Renminbi under capital account convertibility as the world's hard currency will enable China to become more integrated into the world economic trend, playing a leading role in the wider world economy affairs. In November 1996 China declared a formal acceptance of the International Monetary Fund (IMF) Article 8 with the free convertibility of Renminbi under current account coming into reality, and subsequently the realization of Renminbi capital account opening to the outside world would be an irreversible trend. China's joining the World Trade Organization will speed up the development of this trend.Based on the process of the contemporary developed countries' capital account liberalization, this article purposes to review the process of history and characteristics of the emerging market economies' transition from the current account liberalization to that of the capital account, contrasting China's capital account liberalization in history and current situation. It also points out, for a period of time in the near future, that the promotion of capital account convertibility of the Yuan will be reflected in a selective, step-by-step opening up of capital markets and the related capital account transactions. In this process, foreign exchange management in capital markets and its deepening reform play a vital role in achieving an effective prevention of the risk of cross-border capital flows, and at the same time, in relaxation of restrictions on capital account transactions and steady liberalization of the capital account. Meanwhile, the realization of the Renminbi basic convertibility under capital account will have an enormous impact upon China's capital flows, exchange rate and the development of China's securities markets. The new policy is launched just around the corner.