IMF高级宏观经济学研修班CT1405MMF-L08ManagingI

1、L-8 Part II. Managing Capital Flows in ChinaPresenterRay BrooksJoint China-IMF Training ProgramCourse on Macroeconomic Management and Financial Sector IssuesCT 14.01This training material is the property of the International Monetary Fund (IMF) and is intended for use in IMF Institute courses. Any r

2、euse requires the permission of the IMF Institute.1OutlineWhat was the experience with capital flows?How were capital flows managed in the past?Were capital controls effective?What will happen to with capital flows with liberalization? Experience of liberalization in other countriesBenefits and risk

3、s of opening the capital account in ChinaSteps toward successful liberalization in China2Chinas Experience: Forex inflows were sizable, but mainly from the current account surplus.3the capital and financial account was also in surplus and volatile.4FDI flows were large5FDI and other Capital Flows we

4、re large in a global context too6Gross Capital Flows were also large7How were capital flows managed in the past?A combination of policies managed the flows:Exchange rate policy (gradual appreciation)Sterilization of forex inflowsReserve requirements on banksCapital controls Improved prudential and s

5、upervisory policies8Nominal and Real Effective Exchange Rates appreciated since 2005 reform9Sterilization: Official Reserves increased considerably10With considerable variation in the extent of forex intervention11The reserve requirement on banks was increased to manage the liquidity impact of forex

6、 inflows12Capital Account controls were eased in past decade but remain restrictive13China remains relatively closed14Were capital controls effective? Flows do not appear sensitive to interest rate differentialFranziska Ohnsorge and Steven Barnett, IMF March, 201315But sensitive to US interest rateF

7、ranziska Ohnsorge and Steven Barnett, IMF 201316What will happen to capital flowswith liberalization?17What happened in other countries? 20+ episodes of capital account liberalization (Kaminsky and Schmukler, 2003) in AM and EM since 1979. The increase in net capital inflows from the year before to

8、the year after liberalization depended on:State of domestic versus world business cycleTime since financial sector liberalizationGross international assets and liabilities increased on average by 19-20 percentage points of GDP over the following five years. 18Portfolio inflows increased and.Bayoumi

9、and Ohnsorge, IMF WP 201319 as did other investment flows. Bayoumi and Ohnsorge, IMF WP 201320Capital account liberalization was almost always followed by increases in gross foreign assetsBayoumi and Ohnsorge, IMF WP 201321.and often also increases in gross foreign liabilities.Bayoumi and Ohnsorge,

10、IMF WP 201322Recent IMF study predicts rise in Chinese assets with liberalization of capital accountBayoumi and Ohnsorge, IMF WP 201323Experience of other countries: liberalization often followed by exchange rate or banking crisisBayoumi and Ohnsorge, IMF WP 201324Some country casesKorea: liberated

11、capital controls before exchange liberalization: led to currency mismatches on balance sheets and 1997 crisisIsrael: Unsuccessful “big bang” liberalization in 1977, large inflows that reversed. Controls reintroduced 1 years later. Subsequent reform better managed. Sweden: capital account liberalizat

12、ion in 1989 and financial liberalization led to credit boom. Could not defend fixed exchange rate. Turkey: capital account liberalization with fiscal dominance: destabilizing capital flows and two crises (1994 and 2001). Emerging markets with more flexible exchange rates have generally fared better

13、in face of external pressures (Chile, Peru, South Africa)25Benefits of opening the capital account in ChinaBetter allocation of capital and risk diversificationWider use of RMB as international currencyWould help rebalance growth away from reliance on exports and investment, with supporting financia

14、l and exchange rate reformsWould facilitates financial sector reform and development by:Improving liquidity in domestic equity marketsIntroducting competitionBanking sector, with foreign bank entry bringing benefits to savers and borrowersInsurance sector currently protected, would face greater comp

15、etitionCapital controls less effective over time in face of expanded trade and more sophisticated investors26Risks of opening the capital account in ChinaGross capital flows could be large after liberalizationPotential problems:Asset bubblesCapital flightCurrency and maturity mismatches in bank and

16、corporate balance sheetsProblems could lead to crisis as seen in other countriesUnderlines need for cautious and integrated approach to liberalization, with accompanying reforms 2728Steps toward successful Capital Account Liberalization (IMF A4 2012)Aim to harness benefits of open capital flows whil

17、e mitigating the risks.Sequencing importantbut plans should be flexible and tuned to changing circumstancesSome prerequisites: Exchange rate reformgreater flexibility would reduce capital flows and allow for independent monetary policy New monetary frameworkobjectives of growth, inflation and financ

18、ial stabilityRegulation and supervisionimprove supervision, regulation, and risk monitoring29Steps toward Capital Account Liberalization cont. Interest rate liberalizationmove to market-determined loan and deposit rates should not involve loosening of monetary policyFull liberalization, esp. short-term capital flows, wait until bulk of above reforms in place30Use qualified foreign and domestic inst