IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/233.html
   My bibliography  Save this paper

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

Author

Listed:
  • Guonan Ma
  • Robert N. McCauley

Abstract

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.

Suggested Citation

  • Guonan Ma & Robert N. McCauley, 2007. "Do China's capital controls still bind? Implications for monetary autonomy and capital liberalisation," BIS Working Papers 233, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:233
    as

    Download full text from publisher

    File URL: http://www.bis.org/publ/work233.pdf
    File Function: Full PDF document
    Download Restriction: no

    File URL: http://www.bis.org/publ/work233.htm
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. repec:bis:bisqtr:0008f is not listed on IDEAS
    3. 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.
    4. repec:bis:bisqtr:0109f is not listed on IDEAS
    5. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jorg Bibow, 2011. "Permanent and Selective Capital Account Management Regimes as an Alternative to Self-Insurance Strategies in Emerging-market Economies," Economics Working Paper Archive wp_683, Levy Economics Institute.
    2. Naoyuki Yoshino & Sahoko Kaji & Tamon Asonuma, 2016. "Dynamic Effects of Changes in the Exchange Rate System," Asian Development Review, MIT Press, vol. 33(1), pages 111-161, March.
    3. Hutchison, Michael & Kendall, Jake & Pasricha, Gurnain & Singh, Nirvikar, 2009. "Indian capital control liberalization: Evidence from NDF markets," Working Papers 09/60, National Institute of Public Finance and Policy.
    4. Dobson, Wendy & Masson, Paul R., 2009. "Will the renminbi become a world currency?," China Economic Review, Elsevier, vol. 20(1), pages 124-135, March.
    5. Ichiro Otani & Tomoyuki Fukumoto & Yosuke Tsuyuguchi, 2011. "China's Capital Controls and Interest Rate Parity: Experience during 1999 - 2010 and Future Agenda for Reforms," Bank of Japan Working Paper Series 11-E-8, Bank of Japan.
    6. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.
    7. Gunther Schnabl, 2011. "The role of the chinese dollar peg for macroeconomic stability in China and the world economy," Global Financial Markets Working Paper Series 13-2010, Friedrich-Schiller-University Jena.
    8. Straub, Roland & Thimann, Christian, 2010. "The external and domestic side of macroeconomic adjustment in China," Journal of Asian Economics, Elsevier, vol. 21(5), pages 425-444, October.
    9. Hongyi Chen & Lars Jonung & Olaf Unteroberdoerster, 2014. "Lessons for China from Financial Liberalization in Scandinavia," Asian Economic Papers, MIT Press, vol. 13(1), pages 1-44, Winter.
    10. Kevin Gallagher, 2011. "Regaining Control? Capital Controls and the Global Financial Crisis," Working Papers wp250, Political Economy Research Institute, University of Massachusetts at Amherst.
    11. David Leung & John Fu, 2014. "Interactions between CNY and CNH Money and Forward Exchange Markets," Working Papers 132014, Hong Kong Institute for Monetary Research.
    12. Glick, Reuven & Hutchison, Michael, 2009. "Navigating the trilemma: Capital flows and monetary policy in China," Journal of Asian Economics, Elsevier, vol. 20(3), pages 205-224, May.
    13. repec:rnp:ecopol:ep1711 is not listed on IDEAS
    14. Ferrantino, Michael J. & Liu, Xuepeng & Wang, Zhi, 2012. "Evasion behaviors of exporters and importers: Evidence from the U.S.–China trade data discrepancy," Journal of International Economics, Elsevier, vol. 86(1), pages 141-157.
    15. Wendy Dobson & Anil K. Kashyap, 2006. "The Contradiction in China's Gradualist Banking Reforms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 103-162.
    16. Liu, Lin & Chang, Hsu-Ling & Su, Chi-Wei & Jiang, Chun, 2013. "Real interest rate parity in East Asian countries based on China with flexible Fourier stationary test," Japan and the World Economy, Elsevier, vol. 25, pages 52-58.
    17. Liu, Yan & Chang, Hsu-Ling & Su, Chi-Wei, 2013. "Do real interest rates converge across East Asian countries based on China?," Economic Modelling, Elsevier, vol. 31(C), pages 467-473.
    18. repec:wsi:ceprxx:v:02:y:2013:i:01:n:s1793969013500039 is not listed on IDEAS
    19. Marie Luise Funke & Helena Xiang Li & Horst Löchel, 2016. "The High Profitability of Big Chinese State-Owned Banks and China’s Growth Model," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 33(1), pages 121-134, August.
    20. Su, Chi-Wei & Chang, Hsu-Ling & Chang, Tsangyao & Yin, Kedong, 2014. "Monetary convergence in East Asian countries relative to China," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 228-237.

    More about this item

    Keywords

    Foreign exchange market; capital flows; capital controls; monetary policy; financial stability and the Chinese economy;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:233. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Beslmeisl). General contact details of provider: http://edirc.repec.org/data/bisssch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.