Do Inflows or Outflows Dominate? Global Implications of Capital Account Liberalization in China

Author/Editor: Tamim Bayoumi ; Franziska Ohnsorge
Publication Date: August 28, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper assesses the implications of Chinese capital account liberalization for capital flows. Stylized facts from capital account liberalization in advanced and large emerging market economies illustrate that capital account liberalization has historically generated large gross capital in- and outflows, but the direction of net flows has depended on many factors. An econometric portfolio allocation model finds that capital controls significantly dampen cross-border portfolio asset holdings. The model also suggests that capital account liberalization in China may trigger net portfolio outflows as large domestic savings seek to diversify abroad.
Series: Working Paper No. 13/189
Subject(s): Capital account liberalization | China | Capital inflows | Capital outflows | Capital flows | Reserves accumulation

Publication Date: August 28, 2013
ISBN/ISSN: 9781475532159/1018-5941 Format: Paper
Stock No: WPIEA2013189 Pages: 32
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