Capital Account Liberalization In Developing Countries And China's Strategy

With globalization of the world economy and finance, international capital flows have increased markedly in recent years, especially the capital flowing to developing countries have grown rapidly. Correspondingly, most developing countries gradually relaxed restrictions on capital market. And developing countries also opened currencies' capital account, lightened the restrains on capital account. Since the industrial countries have totally opened their capital account as Iceland abolished its limits on capital account thoroughly in 1994, capital account liberalization has evidently been economic issues in developing countries. This is one of the reasons that this thesis takes developing countries as the research object.After the outbreak of Southeastern Asian Crisis, the debate about continuing capital account liberalization or adopting more severe controls became vehement. Public opinion attributes the crisis to the rapid or undue capital account liberalization in these countries. Either the one who persists in opening capital account or the one hesitating to open, both analyzed the gains and the costs of opening capital account. The former considers the profit gained from opening shall be more than costs, and the latter just holds the opposite opinion, which form the two different sides in sphere of learning. The structure of globalization has been shaping, countries have been seeking for wealth maximum in opening world. If a country, especially a developing country, insists on closing the country to international intercourse, it will be confined by its own backward development model which will finally cause the country impacted by globalization. On the other hand, as the product of globalization, opening capital account also has dual characters as advantage and disadvantage. As for developing countries, they have the same characters as that the national economy system and structure is not sound enough, and the infrastructure haven't corresponded to the international standard, the ability to withstand the impact is still very weak. So to choose appropriate policy is the key to the question. The outbreak of Southeastern Asian Crisis has issued a warning to developing countries that in order to gain profits in opening capital account a country should think prudently a good opening sequence and integrate opening policy with macroeconomic reform. This thesis stands on the developing countries side to compare the advantage to the disadvantage of opening up the capital account, hoping to get experience and tactics more beneficial and suitable for developing countries and give China who has the same character as developing countries some useful advice. The thesis introduces and explains the meaning of opening capital account and relative concept. From the regulations of currency's convertibility which provided by International Monetary Fund to the request of OECD, all the content is concluded in the range of research.It has been dozens of years since developing countries began to try opening capital account. Before they set strict restrains on capital account all along. With the development of liberalization in emerging market, developing countries start to lighten their limit on capital account. Though there is great difference between the experiences of developing countries, we also can conclude some features in common. They took capital liberalizing reform as one part of macroeconomic stabilizing policies. And almost all the countries opened under the relatively floating exchange system, with the interest rate liberalization carried out before or simultaneously with the financial system liberalization. The international balance of payment bettered at the beginning of opening. They all followed a gradual order and took necessary limit on capital account when they opened capital account. It is also obvious that countries can choose time and sequence to relax capital account restraints by themselves.The different choices are based on different profit-cost knowledge of opening capital account. T...