| With China deregulating the administration of current account in 1990 s, China officially became the member countries of the eighth clause of Articles of Agreement of IMF and announced the country has achieved the free convertibility of current account. The financial crises experienced by some countries, hindered the process of capital account liberalization. When it comes to the year of 2010, the central bank officially list "achievement capital account liberalization and free convertibility" as the major task for financial sector. Meanwhile, the paper prepared by the research team of the central bank indicated that China has accelerated capital account liberalization and pre-conditions for such achievement have been ripe. With the "qualified institutional investors" system continued to get expansion, foreign exchange management system under direct investment and foreign debt management system getting further loose, the pilot program of capital account liberalization in Shanghai Free Trade Zone undergoing, all the positive signal shows that China is on the way to realize the capital account convertibility.However, the further liberalization of capital account will also exposes our country under the great danger for the free convertibility, and also financial crisis in extreme cases. For the cross-border capital flows to run under reasonable order and for the best configuration of the global capital, the country have to set a profound legal framework for prevention of such financial crisis, such as the reservation of the right to implement temporary capital control measures.The capital account liberalization pilot program of Shanghai Free Trade Zone plays an important role for the liberalization of capital account on a national scale. During the past one year and a half, several batches of liberalization policies were issued in the Free Trade Zone. However, the reform in the foreign exchange administration witnesses some legal issues of the pilot program policy. There are some discrepancies between the free trade zone policy and the national regulation. This essay focuses on the legal issues under the Shanghai Free Trade Zone policies, and lies in the legal requirement of the implementation of some temporary control measures from the perspective of international law. During the writing of this essay, the author found the legal issues within the scope of the legal system of Shanghai Free Trade Zone, also were found in the territory of China. Thus, the author also tries to work out some solution to tackle the inconsistency of the regulations during the liberalization of capital account. To provide the legal protection for the promotion of liberalization of capital account, the Regulation on the Administration of Foreign Exchange Administration shall be revised regarding the legal system in the prevention of financial crisis.In this paper, author will first clarify some legal issues, such as the scope of capital account transaction, the understanding of free convertibility of capital account transaction and the international law regime of capital account liberalization and its free convertibility. Based on the better understanding of the abovementioned concept, the author will focus on the legal issues in the legal framework of the capital account liberalization pilot program. Eventually, the author is trying to work out some suggestion for the revision of Regulation on the Administration of Foreign Exchange.This paper is divided into four chapters.The first chapter focus on the understanding of capital account transaction and the realization of free convertibility of capital account transaction, and the latest development of China’s capital account liberalization by deregulation of cross-border direct investment, security transaction, international loan and guarantee and also real estate deals.The second chapter focuses on the international law regime for the country to realize the free convertibility of cross-border capital. The author analyzes the Articles of Agreement of IMF, the Code of Liberalization of Capital Movements of OECD and international investment treaties executed by our county. Owing to the lack of a comprehensive, multilateral international legal framework governing the management of cross-border capital flows, the world is facing the danger of potential financial risk.The third chapter analyzes the legal issues Shanghai FTA Pilot capital account convertibility. Firstly, the author tries to tackle the conflicts existing under the Shanghai pilot regulation and national regulation. Secondly, the author tries to work on the policy of temporary capital flow control measures from the perspective of international legal framework. By searching on the legitimate requirement of the capital flow control measures, the policy within Shanghai Free Trade Zone which gives the right for the Central Bank Shanghai Branch to implement the capital flow control measures contains great legal risks. However, the abovementioned legal issues do not exist in Shanghai Free Trade Zone only, it reflect the legislation vulnerability of the Regulations on the Administration of Foreign Exchange.The fourth chapter focus on the revision of the Regulations on the Administration of Foreign Exchange on the marco-level view and on the specific idea for China to amend the Regulation and further realize the capital account liberalization. Finally, the conclusion part completely combs the entire contents of this article and summarizes author’s main points. It also illustrates that the author will continue to pay attention to the establishment and development of the Shanghai Free Trade Zone, to the enactment of legal framework of cross-border capital flows. Besides, in this part, the author gives some suggestions to help further capital account liberalization and establish relate legal system of its risk prevention according to current states. |
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