New Task Force Report on Capital Account Liberalization in China

The Frederick S. Pardee Center for the Study of the Longer-Range Future in collaboration with the Boston University Center for Finance, Law & Policy has published a new Pardee Center Task Force Report titled “Capital Account Liberalization in China: The Need for a Balanced Approach.”

This is the third report stemming from the Pardee Center Task Force on Regulating Capital Flows for Long-Run Development, a project of the Global Economic Governance Initiative (GEGI) at BU. Co-directed by BU Professors Kevin P. Gallagher and Cornel Ban, GEGI’s mission is to advance policy relevant knowledge on governance for financial stability, human development, and the envrionment. GEGI is co-sponsored by the Frederick S. Pardee Center for the Study of the Longer-Range Future, the Center for Finance, Law & Policy, and the Frederick S. Pardee School of Global Studies.

This report examines the benefits and risks of accelerated capital account liberalization in China. To help frame the discussion, the Task Force thought it would be helpful to discuss the experience of other emerging market countries that liberalized the capital account in the past, in order to draw out lessons for China as it considers this delicate task. The previous Task Force report, “Capital Account Regulations and the Trading System: A Compatibility Review,” is also important here. That report noted that an increasing number of trade and investment treaties prohibit the regulation of capital flows, and the Task Force recommended that such treaties have safeguards that enable nations to regulate capital flows to prevent and mitigate the harmful aspects of cross-border finance. The first report, “Regulating Capital Flows for Long-Run Development,” also remains salient, and highlights developments in economics and country experience that show why it is important to regulate capital flows now more than ever.

The Report was officially launched at an event on October 3, co-sponsored by the Pardee Center, Pardee School of Global Studies, and the Center for Finance, Law & Policy.