Financial Integration and the Global Effects of China's Growth Surge

China's financial openness, as measured by cross border flows and asset ownership, peaked during its 2000s growth surge, as did downward pressure on global interest rates and price levels. This was despite China's restriction of financial inflows to approved FDI and tight controls on private outflows. We analyze the global effects of the growth surge and their dependence on these financial policies by employing a global macro model with national portfolio rebalancing, in which flexibility in asset differentiation is used to index financial integration. The results suggest that, globally, the growth surge raised asset prices, reduced yields and bolstered deflationary pressures, while improving aggregate economic welfare. It is shown that, without capital controls, most surge effects on China would have been moderated substantially while the global impacts would have been larger.