Economic Premise Note Series
The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. The series is produced by the Poverty Reduction and Economic Management (PREM) Network of the World Bank.
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LATEST ISSUE: Economic Premise No. 74 Capital Account Liberalization: Does Advanced Economy Experience Provide Lessons for China? By Jeff Chelsky PDF download Related blog post The initial post–World War II pursuit of capital account liberalization (CAL) by advanced economies was Europe-centric,with roots in a broader political -- rather than economic -- agenda of greater European integration. In continental Europe,CAL was addressed mostly through the adoption of multilateral instruments and codes. In contrast, CAL by the UnitedStates and United Kingdom was pursued unilaterally, motivated by their status as global reserve currency issuers andglobal financial centers. China’s situation is fundamentally different. China today has no equivalent to the Europeanpolitical motivation for CAL or the domestically driven financial motivation of the United States or the United Kingdom.And while China may have long-term aspirations to be a global reserve currency issuer, the extent to which it internationalizesits currency is constrained by powerful domestic economic and political interests that continue to benefit from anexport-led growth model underpinned by a pegged and undervalued exchange rate, both of which are difficult to maintainwith an open capital account. Alongside China’s overarching concern with the maintenance of financial and economicstability, these factors imply a different path for China than paths taken by advanced economies, with significant accelerationin the gradual pace of liberalization unlikely without accelerated development of domestic constituencies that traditionallysupport CAL.
INDEX OF ECONOMIC PREMISE PAST ISSUES
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