Capital Account Liberalization in China: The Need for a Balanced Approach
This report of the Task Force on Regulating Capital Flows for Long-Run Development is a project of the Global Economic Governance Initiative (GEGI) at Boston University, USA. Co-directed by Boston University Professors Kevin P. Gallagher and Cornel Ban, GEGI’s mission is to advance policy relevant knowledge on governance for financial stability, human development, and the environment. GEGI is housed across three entities at Boston University—the Pardee School of Global Studies, the Center for Finance, Law & Policy (CFLP), and the Pardee Center for the Study of the Longer-Range Future.Along with GEGI’s Kevin P. Gallagher, the co-chairs for this Task Force report are José Antonio Ocampo from the Initiative for Policy Dialogue (IPD) at Columbia University, and Ming Zhang and Yu Yongding from the Institute for World Economics and Politics (IWEP)at the Chinese Academy of Social Sciences. GEGI, IPD, and IWEP are the co-sponsors of this report, and IWEP will publish the report in Chinese.
This is the third in a series of reports of this Task Force. This report, Capital Account Liberalization in China: The Need for a Balanced Approach, examines the benefits and risks of accelerated capital account liberalization in China. To help frame the discussion, the Task Force thought it would be helpful to discuss the experience of other emerging market countries that liberalized the capital account in the past, in order to draw out lessons for China as it considers this delicate task. The previous Task Force report, Capital Account Regulations and the Trading System: A Compatibility Review, also remains salient here. In that report, we found that an increasing number of trade and investment treaties prohibit the regulation of capital flows, and we recommended that such treaties have safeguards that enable nations to regulate capital flows to prevent and mitigate the harmful aspects of cross-border finance. The first report, Regulating Capital Flows for Long-Run Development, also remains salient, and highlights developments in economics and country experience that show why it is important to regulate capital flows now more than ever.
About the Authors
Kevin P. Gallagher
Department of International Relations
Dr. Kevin P. Gallagher is an associate professor of international relations at Boston University, and senior researcher at the Global Development and Environment Institute at Tufts University. He specializes in global economic and development policy, with an emphasis on Latin America.
Professor Gallagher is the author of The Dragon in the Room: China and the Future of Latin American Industrialization (with Roberto Porzecanski), The Enclave Economy: Foreign Investment and Sustainable Development in Mexico's Silicon Valley (with Lyuba Zarsky), and Free Trade and the Environment: Mexico, NAFTA, and Beyond. He writes a monthly column on globalization and development for the The Guardian (UK) newspaper.
Professor Gallagher is also a research fellow at Boston University’s Frederick S. Pardee Center for the Study of the Longer-Range Future where he directs the Global Economic Governance Initiative. In 2010 he served on the US Department of State’s investment subcommittee of the Advisory Committee on International Economic Policy.
Director, Institute of World Economics and Politics
Chinese Academy of Social Science
Yongding Yu is an Academician of Chinese Academy of Social Sciences (CASS), President of China Society of World Economy (2003-present), and Editor-in-Chief of China and the World Economy. He is a member of the Advisory Committee of National Planning for National Development and Reform of PRC, a member of the Advisory Committee of the Ministry of Foreign Affairs of the PRC and a member of the UN Committee of Development Policy. He was Director-General at the Institute of World Economics and Politics (IWEP) with the CASS (1998-2009) and member of the Monetary Policy Committee of People’s Bank of China (2004-2006). Yu Yongding received his MA in economics from Graduate School of Chinese Academy of Social Sciences and D.Phil. in economics from the University of Oxford. He has authored, co-authored and edited more than 10 books, and published numerous papers and articles on macroeconomics, international finance and other subjects.
Postdoctoral Research Scholar
Committee on Global Thought
Bilge Erten is a Postdoctoral Research Scholar at Committee on Global Thought, Columbia University. She completed her Ph.D. in Economics from the University of Massachusetts Amherst in 2010. Her current research focuses on the use of macroprudential and capital account policies by developing countries to manage foreign exchange pressure, improve monetary policy autonomy, and enhance crisis resilience and post-crisis overheating in a counter-cyclical way. In particular, her research analyzes the macroeconomic effectiveness of capital account regulations including capital inflow/outflow restrictions, foreign exchange related prudential measures, and financial sector specific regulations on international borrowing.
José Antonio Ocampo
Initiative for Policy Dialogue (IPD)
Jose Antonio Ocampo is Co-President of IPD, Professor of Professional Practice in the School of International and Public Affairs, and Fellow of the Committee on Global Thought at Columbia University. Prior to his appointment at Columbia, Professor Ocampo served as the United Nations Under-Secretary-General for Economic and Social Affairs, and head of UN Department of Economic and Social Affairs (DESA), as Executive Secretary of the UN Economic Commission for Latin America and the Caribbean (ECLAC), and has held a number of high-level posts in the Government of Colombia, including Minister of Finance and Public Credit, Director of the National Planning Department, and Minister of Agriculture . Professor Ocampo is author or editor of over 30 books and has published over 200 scholarly articles on macroeconomic theory and policy, international financial issues, economic development, international trade, and Colombian and Latin American economic history.
Jan Allen Kregel
Professor, Levy Economics Institute
Jan Kregel is a senior scholar at the Levy Economics Institute of Bard College and director of its Monetary Policy and Financial Structure program. He also holds the positions of professor of development finance at Tallinn University of Technology, Estonia and Distinguished Research Professor in the University of Missouri, Kansas City. In 2009, Kregel served as Rapporteur of the President of the UN General Assembly’s Commission on Reform of the International Financial System. He previously directed the Policy Analysis and Development Branch of the UN Financing for Development Office and was deputy secretary of the UN Committee of Experts on International Cooperation in Tax Matters. He is a former professor of political economy at the Università degli Studi di Bologna and a past professor of international economics at Johns Hopkins University’s Paul Nitze School of Advanced International Studies, where he was also associate director of its Bologna Center from 1987 to 1990.
Deputy Director, Research Section of International Finance
Institute of World Economics and Politics
Chinese Academy of Social Science
Sunanda Sen is a national fellow of the Indian Council of Social Science Research and a visiting professor at the Institute for Studies in Industrial Development, Delhi; Jamia Millia Islamia University, Delhi; and the Institute of Development Studies Kolkata, among other institutions in India and overseas. She previously taught for nearly three decades at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, Delhi. In 1994, she held the Joan Robinson Memorial Lectureship at Cambridge University, and she is a life fellow of Clare Hall, Cambridge.
Dr. Kenji Aramaki is a Professor on International Finance at the Graduate School of Arts and Science, the University of Tokyo
Dr. Daniela Gabor is an Associate Professor at University of the West of England.
Dr. Robert McCauley is the Senior Advisor for the Monetary and Economic Department at the Bank of International Settlements.