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Gaining CurrencyThe Rise of the Renminbi$
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Eswar S. Prasad

Print publication date: 2016

Print ISBN-13: 9780190631055

Published to Oxford Scholarship Online: October 2016

DOI: 10.1093/acprof:oso/9780190631055.001.0001

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Capital Account Opening

Capital Account Opening

Chapter:
(p.37) Chapter 3. Capital Account Opening
Source:
Gaining Currency
Author(s):

Eswar S. Prasad

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190631055.003.0003

This chapter shows that China’s capital account is becoming increasingly open, in both de jure and de facto terms. China still maintains capital controls but has created a number of schemes for liberalization of inflows, outflows, and two-way flows of financial capital. China’s international investment position has many interesting characteristics. The country has an overall net external asset position, i.e., it is a creditor to the rest of the world. Its external assets are largely in the form of foreign exchange reserves while its external liabilities are dominated by foreign direct investment. Controlled capital account liberalization has reduced the risks of free capital flows and helped to generate some indirect benefits, including catalyzing domestic financial sector reforms. The government’s goal appears to be a largely open capital account, but with some administrative controls that restrict speculative and illicit capital flows.

Keywords:   capital controls, capital account liberalization, capital flows, Qualified Foreign Institutional Investor (QFII) scheme, free trade zones, international investment position

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