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Do China's capital controls still bind? Implications for monetary autonomy and capital liberalisation

  • Guonan Ma
  • Robert N. McCauley

The paper argues that China's capital controls remain substantially binding. This has allowed the Chinese authorities to retain some degree of short-term monetary autonomy, despite the fixed exchange rate up to July 2005. Although the Chinese capital controls have not been watertight, we find sustained and significant gaps between onshore and offshore renminbi interest rates and persistent dollar/renminbi interest rate differentials during the period of a de facto dollar peg. While some cross-border flows do respond to market expectations and relative yields, they have not been large enough to equalise onshore and offshore renminbi yields.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 233.

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Length: 34 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:bis:biswps:233
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  1. Yoon Je Cho & Robert N McCauley, 2003. "Liberalising the capital account without losing balance: lessons from Korea," BIS Papers chapters, in: Bank for International Settlements (ed.), China's capital account liberalisation: international perspective, volume 15, pages 75-92 Bank for International Settlements.
  2. Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
  3. Guy Debelle & Jacob Gyntelberg & Michael Plumb, 2006. "Forward currency markets in Asia: lessons from the Australian experience," BIS Quarterly Review, Bank for International Settlements, September.
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