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An Evaluation of the Impact of the China (Shanghai) Pilot Free Trade Zone (SPFTZ)


  • Daqing Yao
  • John Whalley


In this paper we present evidence as to the effects of the China (Shanghai) Pilot Free Trade Zone (SPFTZ) on China’s capital controls. The start of the SPFTZ in September, 2013 was a trial to introduce a combination of exchange rate floating and capital account liberalization into China’s macro policy mix. We employ three methods to test the SPFTZ’s impact on capital controls: price spread tests between CNH and CNY, RMB yield gaps between onshore and offshore RMB markets, and Granger causalities among China’s money supply and the foreign interest rates. All these tests give consistent results suggesting that the impact of China’s capital controls is weaker since the SPFTZ.

Suggested Citation

  • Daqing Yao & John Whalley, 2015. "An Evaluation of the Impact of the China (Shanghai) Pilot Free Trade Zone (SPFTZ)," NBER Working Papers 20901, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20901
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    References listed on IDEAS

    1. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
    2. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
    3. Daqing Yao & John Whalley, 2015. "The China (Shanghai) Pilot Free Trade Zone: Background, Developments and Preliminary Assessment of Initial Impacts," NBER Working Papers 20924, National Bureau of Economic Research, Inc.
    4. Guonan Ma & Robert N McCauley, 2008. "Efficacy Of China'S Capital Controls: Evidence From Price And Flow Data," Pacific Economic Review, Wiley Blackwell, vol. 13(1), pages 104-123, February.
    5. John Whalley & Hejing Chen, 2013. "Are Offshore RMB Arrangements the Basis for a Long-term Exchange Rate System without Convertibility?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 21(1), pages 26-46, January.
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    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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