China's Capital Account Convertibility and Financial Stability

Laurenceson, James and Tang, Kam Ki (2005) China's Capital Account Convertibility and Financial Stability. Discussion Paper, No. 5, East Asia Economic Research Group, School of Economics, The University of Queensland.

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Author Laurenceson, James
Tang, Kam Ki
Title China's Capital Account Convertibility and Financial Stability
School, Department or Centre East Asia Economic Research Group, School of Economics
Institution The University of Queensland
Open Access Status Other
Report Number Discussion Paper, No. 5
Publication date 2005-10-01
Subject 340203 Finance Economics
Abstract/Summary Capital account convertibility in China is on the rise. Some see the process as a means of circumventing domestic financial sector inefficiency while others view it as potentially exposing China to financial crises. In considering these different viewpoints, this paper attempts to quantify the impact that opening the capital account will have on the volume of China's international capital flows. It is found that were China to fully open its capital account, gross non-FDI capital flows are predicted to rise by around 4.6 percent of GDP. While an increase of this magnitude would present a prudential challenge for China’s monetary authorities, it does not appear to be large enough to seriously call into question financial sector stability, either in China or abroad.
Keyword China
capital account convertibility
capital flow

Document type: Department Technical Report
Collection: Discussion Papers (School of Economics)
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Created: Thu, 13 Oct 2005, 10:00:00 EST