Capital Controls

11 Key excerpts on "Capital Controls"

• 

  eBook - ePub

  Advanced Country Experiences with Capital Account Liberalization

  • Age Bakker, and Bryan Chapple(Authors)
  • 2002(Publication Date)
  • INTERNATIONAL MONETARY FUND

    (Publisher)

  III Capital Controls and Monetary Policy

  Passage contains an image

  General Overview

  Capital Controls in advanced economies have often been established in an attempt to increase the room for maneuver of monetary policy by allowing monetary policy instruments to focus on domestic objectives. In the face of the “incompatible triangle” of simultaneously achieving an autonomous monetary policy, freedom of capital movements, and a stable exchange rate, the authorities have generally considered Capital Controls to be the lesser evil, creating the fewest economic distortions and implying the least political costs. In theory, by driving a wedge between domestic and international interest rates, Capital Controls allow the exchange rate to be maintained irrespective of external developments. Exchange rate pressures can be countered by introducing or tightening capital restrictions, avoiding the need to adjust interest rates when that is judged inappropriate in the light of domestic policy goals. Monetary policy can thus be directed at achieving domestic objectives while other policy instruments, including fiscal policy, are left to take care of the external balance.

  In this chapter, monetary policy considerations in the use of Capital Controls are illustrated by the experiences of a number of advanced economies. First, lessons are drawn from the attempts, both in the United Stales and in Europe, to preserve domestic monetary goals in the face of the large speculative capital flows in the final years of the Bretton Woods system, starting in the mid-1960s. The United States, as the major reserve currency country, had generally not imposed exchange controls in the postwar period. When confronted with speculative outflows in the 1960s, however, it sought to maintain a low interest rate policy by taking restrictive domestic measures and eventually introducing Capital Controls. At the same time, European countries tried to stem the resulting inflows, first by indirect measures aimed at discouraging nonresidents from acquiring domestic assets (for example, through reserve requirements or the prohibition of payment of interest on such assets) but eventually also through direct Capital Controls. Even previously liberal countries, such as the Federal Republic of Germany and Switzerland, tightened their exchange control regimes. Most of these Capital Controls were abolished soon after the end of the Bretton Woods system.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Capital Controls and Capital Flows in Emerging Economies

  Policies, Practices, and Consequences

  • Sebastian Edwards(Author)
  • 2009(Publication Date)
  • University of Chicago Press

    (Publisher)

  more e ffi cient financial market. Controls on capital inflows and outflows could create a wedge between domestic and foreign interest rates, thereby providing a country with more flexibility to follow an independent mone-tary policy. Changes in exchange rates, the financial system, and interest rates will, in turn, a ff ect a range of microeconomic variables in the econ-omy. 27 The paper also does not make any attempt to address the political economy of Capital Controls, such as what factors determine whether a country is more likely to adopt controls or liberalize its capital account. 28 Although this survey does not address a number of questions, largely due to the limited microeconomic evidence that currently exists on these is-sues, it does present a series of convincing results on the e ff ects of Capital Controls and benefits from capital account liberalizations. Although some specific e ff ects vary across country experiences, Capital Controls generally reduce the supply of capital, increase the price of capital, and increase fi-nancial constraints, especially for smaller firms, firms in less distorted fi-nancial markets, and firms without access to international financial mar-kets or preferred access to credit. Capital Controls can insulate an economy from competitive forces, reducing market discipline and hindering the e ffi-cient allocation of capital through several channels. Capital Controls can also cause widespread distortions in behavior, a ff ecting multinationals, domestic companies, and individuals. Moreover, administering Capital Controls requires a recurrent cost by the government, especially to enforce the regulations and update rules to close loopholes. These widespread e ff ects of Capital Controls suggest that even though they may yield limited benefits in certain circumstances, they also have substantial and often un-expected economic costs. Capital Controls are no free lunch. References Abalkin, A., and John Whalley.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The Design and Use of Political Economy Indicators

  Challenges of Definition, Aggregation, and Application

  • K. Banaian, B. Roberts, K. Banaian, B. Roberts(Authors)
  • 2008(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  CHAPTER 5 A New and Better Measure of Capital Controls Pariyate Potchamanawong, Arthur T. Denzau, Sunil Rongala, Joshua C. Walton, and Thomas D. Willett 1 Introduction There has long been a substantial controversy about the role of Capital Controls. The designers of the Bretton Woods postwar international monetary system anticipated that Capital Controls would be a permanent feature of the system. Over time, however, views of many economists and officials changed with Capital Controls becoming seen as having greater costs and freedom of capital flows as having greater benefits than before. These changes in view resulted in major shifts toward the liberalization of capital accounts, first in the industrial countries and then in many developing countries. With the recent rash of currency crises in emerging market countries in the 1990s, considerable support for limiting the freedom of international capital flows reemerged. 1 Many blamed capital mobility, either directly or indirectly, rather than national policies, for the crises. During the 1997 crises, India and China were largely left untouched, and some argued this was because they had substantial controls; Willett et al. (2004), however, present estimates that these countries’ fundamentals were sufficiently strong that they would not have faced substantial speculative attacks even in the absence of controls. Scholars such as Leblang (2001) and Glick and Hutchison (2000b) conducted empirical studies that found that countries with Capital Controls are more prone to currency attacks. Other studies such as Quinn (1997) and Rodrik (1998) have looked at K. Banaian et al. (eds.), The Design and Use of Political Economy Indicators © King Banaian and Bryan Roberts 2008 82 ● Potchamanawong, Denzau, Rongala et al. the relationship between Capital Controls and economic growth and found quite different conclusions, at least in part because they used different measures of Capital Controls.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Globalization and the Asia Pacific Economy

  • Kyung Tae Lee(Author)
  • 2003(Publication Date)
  • Taylor & Francis

    (Publisher)

  This chapter then examines the impact of selective exchange controls on various aspects of the Malaysian economy, and concludes that generalizations should be avoided when assessing controls. Analysis of controls should be on a disaggregated basis to fully understand their implications for the economy. An accurate portrayal of the implications of controls requires knowledge of regulations and rules, and how they are implemented. When specific measures are analysed in a disaggregated manner, selective and well-designed controls would always remain an option when market-based economic policies fail. Controls work well when combined with sound macro-economic policies. Their most important contribution is to allow authorities to fine-tune macro policies to solve specific problems which sometimes arise from inefficiencies in the market mechanism.

  RATIONALE AND VIEWS ON USE OF EXCHANGE CONTROLS

  Countries have imposed controls on capital flows to address different areas of concern. Traditionally, controls were aimed at curbing capital outflows, but more recently, Chile and Malaysia have used controls as measures to safeguard the economy from adverse effects of volatile capital flows. The rationale for imposing exchange or Capital Controls to address volatility of capital flows and to restore stability in financial markets is very different from the traditional use of controls on capital to protect the balance of payments and reserves position. A persistent deterioration in the balance of payments due to weak economic fundamentals tends to cause capital flight, in search of safe havens rather than in search of higher returns.

  Controls to address capital flow volatility are also used to achieve a measure of independence in monetary policy. The general view is that controls on capital outflows enable countries to create wedges between domestic and international interest rates, preventing capital outflows in search of higher interest rates abroad. While some countries resort to this option to cover the cost of borrowing for private investors and the government, increasing reliance on this form of controls is intended to stabilize domestic output and inflation, based on country specific circumstances.

  Controls to manage large short-term capital inflows are also aimed at avoiding a real appreciation in the exchange rate that would not reflect long-term economic fundamentals, while causing a loss of external competitiveness. Large capital inflows can either lead to a nominal exchange rate appreciation, if central banks do not intervene in the foreign exchange markets to absorb the capital inflows, or can lead to an increase in the domestic inflation rate if unsterilized intervention by the central banks results in rapid monetary expansion. Lack of adequate instruments to undertake sterilized intervention often results in real appreciation of the currency due to both an appreciation in nominal terms and an increase in domestic prices.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Interpreting Keynes for the 21st Century

  Volume 4: The Collected Writings of Paul Davidson

  • P. Davidson(Author)
  • 2007(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  VII. The architectural solution The function of capital flow regulations is to prevent sharp changes in the bull-bear sentiment from overwhelming the market maker and inducing rapid changes in financial market price trends, for such volatility can have devastating real consequences. There is a spectrum of different Capital Controls available. At one end of the spectrum are controls that primarily impose administrative con- straints either on a case-by-case basis or expenditure-category basis. These controls include administrative oversight and control of individ- ual transactions for payments to foreign residents (or banks) often via oversight of international transactions by banks or their customers. Mayer (1998, pp. 29-30) has argued that the Asian problem was due to the interbank market that created the whirlpool of speculation and that what is needed is "a system for identifying ... and policing interbank lending" and banks' contingent liabilities resulting from dealing in derivatives. Echoing our nonergodic theme, Mayer (1998, p. 31) declares: liThe mathematical models of price movements and covari- ance underlying the construction of these [contingent] liabilities simply collapsed as actual prices departed so far from 'normal' probabilities". Is a Plumber or a New Financial Architect Needed? 21 Other Capital Controls include (a) policies that make foreign exchange available but at different exchange rates for different types of transactions and (b) the imposition of taxes (or other opportunity costs) on specific international financial transactions, e.g., the 1960s United States Interest Equalization Tax. Finally, there can be many forms of monetary policy decisions undertaken to affect net interna- tional financial flows, e.g., raising the interest rate to slow capital out- flows, raising bank reserve ratios, limiting the ability of banks to finance purchases of foreign securities, and regulating interbank activ- ity, as suggested by Mayer.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Financial Liberalisation

  Past, Present and Future

  • Philip Arestis, Malcolm Sawyer, Philip Arestis, Malcolm Sawyer(Authors)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  2 In what follows I examine five factors that, in my view, must appear in any comprehensive account. These include: (1) the rise of increasingly autonomous developing states, largely as a consequence of their successful response to the Asian crisis; (2) the increasing confidence and assertiveness of their policymakers, in part as a consequence of their relative success in responding to the global crisis at a time when many advanced economies have and are still stumbling; (3) a pragmatic adjustment by the IMF to an altered global economy in which the geography of its influence has been severely restricted, and in which it has become financially dependent on its former clients; (4) the intensification of the need for Capital Controls by countries facing a range of circumstances—not just those that confront financial fragility or implosion and those that have been buffeted by the spillover effects of policy choices in wealthy economies, but also those that fared ‘too well’ during the first many years of the crisis; and (5) the evolution in the ideas of academic economists and IMF staff. I will also explore in passing important tensions that have emerged in conjunction with rebranding. Paramount in this regard are attempts to develop a hierarchy in which controls are more acceptable if they focus on inflows and are implemented only as a last resort, are temporary, targeted, and non-discriminatory. Less acceptable are those that target outflows and are blunt, comprehensive, lasting, and discriminatory. In addition, tensions have emerged over the question whether controls should be used by capital-source rather than just capital-recipient countries.

  Others have earlier sought to rebrand controls, though these efforts did not prove sticky outside the Keynesian minority. For instance, Epstein et al. (2004 ) use the term ‘capital management techniques’ to refer to two complementary (and often overlapping) types of financial policies: Capital Controls and those that enforce prudential management of domestic financial institutions. Ocampo (2003 , 2010 ) has long used the term ‘capital account regulations’ to refer to a family of policies, which includes Capital Controls. The IMF now refers to Capital Controls matter-of-factly as ‘capital flow management’ techniques (IMF 2011b ). IMF rebranding is particularly significant. The new, entirely innocuous term is suggestive of a neutral, technocratic approach to a policy instrument that had long been discredited as a vestigial organ of wrong-headed, dirigiste economic meddling in otherwise efficient markets.

  5.2 The Origins of Change: Capital Controls and the East Asian Crisis

  The Asian crisis stimulated new thinking about capital flow liberalization. Key mainstream economists, such as Bhagwati (1998 ) and Feldstein (1998 ), began to be openly critical of the way in which powerful interest groups and the IMF used the Asian (and other) crises to press for capital account liberalization, and caused others to reassess the case for capital liberalization (Obstfeld 1998 ; Krugman 1998 ). IMF research staff started to change their views on Capital Controls, albeit subtly, unevenly, and inconsistently. In the post-Asian crisis context, the center of gravity at the Fund and in the academic wing of the economics profession shifted away from an unequivocal, fundamentalist opposition to any interference with the free flow of capital to a tentative, conditional acceptance of temporary, ‘market-friendly’ inflows controls (Prasad et al. 2003 ). Academic literature on Capital Controls after the Asian crisis reflected this gradually evolving view (Chwieroth 2010 , Chap. 8; Epstein et al. 2004 ; Magud and Reinhart 2006

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Inflation, Growth and International Finance

  • Alec Cairncross(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  It is obvious, for example, that in any centrally planned economy, or even in one making extensive use of controls for purposes of domestic economic management, Capital Controls will be likely to prove more acceptable (and more necessary) than in economies willing to rely more heavily on market forces. By the same token, floating rates of exchange will fit better with the views and habits of the latter type of economy than with those of the former. The future of Capital Controls must therefore depend to some extent on the system of economic management in vogue.

  The system of economic management is unlikely to be simply a matter of political ideology and must reflect to some extent what has been found to work in practice. There may, for example, be a strong aversion to floating rates in countries with large external liabilities uncovered by exchange guarantees. Or experience may suggest that the balance on current account would respond feebly or perversely to depreciation of the exchange rate. Alternatively, countries may be unwilling to run the risk of a deterioration in their terms of trade in an effort to bring their current surplus into line with a larger capital outflow. In these circumstances Capital Controls would find some justification in helping either to stabilise the exchange rate or to avoid less favourable terms of trade.

  The choice which a country makes also depends on the international regime in respect of trade and payments within which it operates. This is partly a matter of following the prevailing fashion and partly of obeying the rules of the game, either out of regard for the common interest or because it does not pay to break them. If other countries are floating, it is impossible to have a fixed rate. If other countries have Capital Controls it becomes harder to avoid introducing them. A country which, left to itself, might prefer to let its exchange rate float may be less than happy when everyone else floats too and may be willing to enter into an international agreement to limit floating even if this obliges it to contemplate the imposition of Capital Controls. In a sense, this is the proposition that was put by the British to the American Government in the discussions leading up to Bretton Woods.

  But there is also, and perhaps more importantly, the question of effectiveness. If for any reason Capital Controls simply do not work it would be an illusion to rely on policies which assume that they do. So far as control over long-term capital movements is concerned, there seems ample evidence that they can be made effective, although never, of course, completely so. The high premium on investment currency in the case of the United Kingdom bears this out. But not all Capital Controls (even over long-term investment) are particularly effective and it is as true of Capital Controls as of others that the more reliance has to be put on them the less effective they are.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Capital Flows, Financial Markets and Banking Crises

  • Chia-Ying Chang(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  There are many ways to manage capital flows and to implement Capital Controls. In terms of the directions of flows, the controls can be on either inflows or outflows or both [Pasricha (2012)]. In terms of the types of flows, the controls can be implemented on bond flows, credit flows or debt flows [Molnar, Tateno, and Supornsinchai (2013), Tamirisa (2006)]. In terms of forms, the controls can be in the form of prudential tax [Wong and Eng (2015)] and/or taxes on financial transactions [Neely (1999), Wibaut (2014)]. In addition to direct controls as mentioned earlier, there are indirect controls to affect capital flows, such as interest rates, reserves [Jeanne (2016), Steiner (2013), Vithessonthi and Tongurai (2013)], the restrictions on the right of capital owners [Sigurgeirsdottir and Wade (2015)] and exchange rate intervention [Blanchard, Adler, and Filho (2015)]. What types controls are needed would depend on economic conditions of one country, such as exchange rate [Ding and Jinjarak (2012), Pandey et al (2015)], credit market tightness indicators [Cheung and Herrala (2014)] and growth, as well as global financial conditions [Ding and Jinjarak (2012)]. Different types of controls might cause different impacts to the economy via different channels. Moreover, the same type(s) of controls, when implemented in different periods of time, might have different impacts due to the changes of economic conditions and global financial conditions. This is why it has been challenging for the empirical studies to analyse the impacts of Capital Controls, especially when grouping many countries together. This is exactly where a theoretical analysis can assist us to focus on specific types of controls to analyse their impacts to the economy and their linkages to the stability of the banking system. It is the goal of this chapter to focus on the direct controls in the form of tax in either and both directions of flows. As the world is interdependent, the effects of Capital Controls of one country would also depend on the controls or non-controls of the other country. This chapter will analyse the impacts of symmetric and asymmetric controls. Such controls are called bilateral and unilateral controls in some research work.

  Capital Controls and perfect capital mobility

  To conclude whether one country should implement/liberalize Capital Controls, one must compare the outcome with Capital Controls to the outcome with perfect capital mobility. Interestingly, most comparisons have focused on either efficiency or welfare/social optima, and most studies find that the economy with Capital Controls can improve market efficiency and can be welfare improving compared to the economy with free capital mobility. To be more specific, in terms of market efficiency, Acharya and Bengui (2016) find that free capital flows cannot support demand and expenditure reallocation during a liquidity trap. So they suggest that capital management can be necessary but must be coordinated across countries. Approaching misallocation from a different direction, El-Shagi (2012a, 2012b) finds that although Capital Controls might distort international capital allocations, Capital Controls would protect the countries from future crises, and it is important that they be implemented. Meanwhile, Forbes (2005) argues that the costs of Capital Controls are sustainable and would lead distortions which would decrease market efficiency. However, through the examination of the market efficiency of Iceland, Graham, Peltomaki, and Sturludottir (2015) find that the stock market of Iceland was more efficient under Capital Controls compared to the periods with free capital flows.

  In terms of welfare analysis, it has been well documented that Capital Controls are welfare improving under many circumstances. The circumstances include the periods during crises [Benigno et al (2014)], when the government may default on behalf of all residents and lead to inefficient private lending [Wright (2006)], when there are prolonged controls and in the debt level below the threshold [Singh and Subramanian (2008)],1 when externality is sufficiently small [Korinek (2011), Michaud and Rothert (2014)], when the financial system is less efficient and costly [Kitano (2011)], when the outcome is inefficient due to externalities [Brunnermeier and Sannikov (2015)] and when the economy has a financial accelerator and a fixed exchange rate regime [Kitano and Takaku (2015)]. Note that the approaches used by these studies are various. Benigno et al (2014) use ex ante and ex post

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Reforming the International Monetary and Financial System

  • INTERNATIONAL MONETARY FUND(Author)
  • 2000(Publication Date)
  • INTERNATIONAL MONETARY FUND

    (Publisher)

  Montek Ahluwalia : “Once you get rid of Capital Controls, it is probably not a good idea to stick them on again. But the impression is that if you have a few Capital Controls, it is not necessary that you should be dismantling them very quickly.”

  The potential role of Capital Controls in mitigating the volatility of international capital flows was also discussed in Calvo and Reinhart’s paper from the perspective of crisis prevention and by Mussa and others from the perspective of both prevention and resolution. Calvo and Reinhart cited evidence from a paper by Montiel and Reinhart (1999) that indicates that Capital Controls had no statistically significant effect on the total volume of inflows, but altered the composition of inflows away from short term and portfolio inflows and toward FDI. At the same time, however, Carmen Reinhart mentioned several caveats. The apparent effect of inflows on the maturity composition of debt could, to some extent, be an artifact of reclassification. More important, capital control measures might simply have led to a substitution of domestic short-term debt for foreign short-term debt. To the extent that domestic short-term debt is also an implicit claim on the reserves of the central bank, such a substitution would not ameliorate the liquidity problem after a sudden capital flow reversal. It follows that a tax on all short-term borrowing may be a preferable strategy to just taxing foreign short-term borrowing. “Thus, governments that attempt to pursue Capital Controls will likely be driven to cast a wide net which covers all financial intermediaries, and even nonfinancial corporations, since the latter participate in the sizable interenterprise credit market. This is an enormous task. Moreover, countries that succeed in this task may find themselves deeply immersed in central planning.”

  Mussa and others made two general points on inflow taxes as a preventive device. First, Chilean-style inflow taxes involve a similar trade-off as that associated with the provision of any public good. In this case, a reduced risk of liquidity crises is paid for by distortionary taxation. Depending on the country and situation, the cost may or may not be worth the benefit. Second, reliance on short-term credit may be an equilibrium response by both borrowers and lenders to asymmetric information (in particular, lack of transparency on the side of borrowers). Intuitively, short-term lending could be regarded as the market’s way of providing finance while at the same time keeping the borrower “on a short leash,” that is, imposing market discipline.3 In this situation, taxing short-term inflows may not make sense, as short-term financing may be the only way for emerging markets to obtain finance for certain uses, including worthwhile ones. Instead, reliance on short-term finance should be reduced by addressing its underlying causes

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Capital Ideas

  The IMF and the Rise of Financial Liberalization

  • Jeffrey M. Chwieroth(Author)
  • 2009(Publication Date)
  • Princeton University Press

    (Publisher)

  (34) (11) (120) (10) (58) (6) (212 / 27) 12. Capital Controls are an essential tool for managing 23.2%** 46.2%** 47.8%* 30.8%* 28.9% 23.1% short-term capital flows. (49) (12) (101) (8) (61) (6) (211 / 26) 13. Capital Controls are an essential tool to ensure domestic 10.5% 15.4% 71.9%** 50.0%** 17.6%** 34.6%** savings are used to finance domestic investment. (22) (4) (151) (13) (37) (9) (210 / 26) T ABLE 3.4 ( continued ) Propositions and Responses upon Completion of Professional Training, Neoclassical versus HKCE Departments Generally agreeing Generally disagreeing No clear opinion Neoclassical HKCE Neoclassical HKCE Neoclassical HKCE Proposition departments departments departments departments departments departments 14. Capital Controls are an essential tool for maintaining an 4.8%** 19.2%** 78.5%** 50.0%** 16.7%* 30.8%* adequate domestic tax base. (10) (5) (164) (13) (35) (8) (209 / 26) 15. Capital Controls do not make economic sense as there 50.7% 48.1% 20.8% 33.3% 28.5% 18.5% are always alternative instruments more effective for achiev-(105) (13) (43) (9) (59) (5) ing the same goals. (207 / 27) 16. Government restrictions on long-term international 69.7%* 53.9%* 17.3%** 38.5%** 12.9% 7.7% capital flows (e.g., foreign direct investment or long-term (145) (14) (36) (10) (27) (2) bank lending) should be abolished altogether. (208 / 26) 17. Government restrictions on short-term international 41.0%** 19.2%** 30.7% 46.1% 28.3% 34.6% capital flows should be abolished altogether. (84) (5) (63) (12) (58) (9) (205 / 26) 18. Market-based restrictions on capital flows—such as a 77.0% 62.9% 3.9% 7.4% 19.0% 29.6% tax—are preferable to quantitative restrictions. (158) (17) (8) (2) (39) (8) (205 / 27) 19. The lack of credibility in the reform process of devel-31.5%** 7.7%** 31.5%** 59.3%** 36.9% 33.3% oping countries or emerging markets makes it appropriate (65) (2) (65) (16) (76) (9) to act quickly to liberalize the capital account early in the reform process.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Financial Liberalization and Economic Performance in Emerging Countries

  • P. Arestis, L. de Paula, P. Arestis, L. de Paula, Kenneth A. Loparo, Luiz Fernando de Paula(Authors)
  • 2008(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  The high number of par- tially open cross-border transactions shows that China is following a gradual strategy of capital account liberalization. The table also makes clear that capital account convertibility for non-residents has been real- ized to a large extent. On the other hand, many cross-border transactions in the capital account are prohibited or partly prohibited for residents. 7.3.1 Institutions of control Controls on cross-border capital flows are imposed by several gov- ernment departments like the State Development and Planning Com- mission, the People’s Bank of China, the China Security Regulation Commission or the Ministry of Commerce (before March 2003, the Ministry of Foreign Trade and Economic Cooperation, MOFTEC). 5 A large administrative body, entitled State Administration of Foreign Exchange (SAFE), is the key institution, which carries out controls, enforces the rules and makes discretionary decisions in many areas. The role and function of SAFE is also to draft policies concerning RMB capital account convertibility, to oversee statistics on capital and financial trans- actions and to provide warning signals concerning the external sector.

  Sign up to read

  Learn more about book