On The Effectiveness Of China's Capital Control Policies

With the development of the economic globalization and the capital liberalization,the capital exchanges between China and other countries are more frequent,which greatly promotes the development of the domestic economy.However,the capital flows have shown the characteristics of increasing volatility and obvious periodicity,which have brought many potential threats to the stability of the domestic economic.In this context,the importance and the complexity of capital control policies are highlighted,and the question whether the capital control policies can make an influence on the cross-border capital flows also becomes the focus of the governments and the academia.From the view of the scale and volatility of capital flows,this paper made an research on this question.This paper analyzed the features of the development of China's capital control policies by reviewing 220 relevant laws and regulations promulgated by SAFE since 1995,and calculated 277 monthly and 92 quarterly capital control intensity indicators from 1995 to 2018,which established the data and legal basis for the empirical analysis.Based on the above research,this paper made an further empirical analysis of the impact of China's capital control policies on the scale and volatility of cross-border capital flows.The results showed that:(1)the intensity of China's capital control is fluctuating and decreasing,and obviously affected by domestic economic environment and international factors;(2)the capital control policy has a significant positive impact on China's cross-border capital inflows,but its impact on the outflow is limited;(3)the capital control policy can effectively reduce the volatility of capital flows,and its impact on inflow is significant.Through the above research,this paper draws the enlightenment.To drive process of the capital liberalization,the government needs to design the capital management mechanism and the warning mechanism rationally,combine macro prudential capital control tools with traditional tools and formulate appropriate economic policies to prevent the risk issues caused by the abnormal cross-border capital flows in the process of capital liberalization.