IMF Working Papers

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

By Tamim Bayoumi, Franziska L Ohnsorge

August 28, 2013

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Tamim Bayoumi, and Franziska L Ohnsorge. Do Inflows or Outflows Dominate? Global Implications of Capital Account Liberalization in China, (USA: International Monetary Fund, 2013) accessed November 23, 2024
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.

Subject: Balance of payments, Bonds, Capital account, Capital account liberalization, Financial institutions, Financial markets, Stock markets, Stocks

Keywords: Average equity, Bond yield, Bonds, Capital account, Capital account, Capital account liberalization, Capital flows, FDI liberalization, Financial development, Foreign currency, Global, Inflow restriction, Investment outflow, Market portfolio, Outflow restriction, Portfolio assets, Portfolio flows, Portfolio investment flow, Portfolio investment inflow, Portfolio investment outflow, Sovereign bond, Stock markets, Stocks, WP

Publication Details

  • Pages:

    32

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2013/189

  • Stock No:

    WPIEA2013189

  • ISBN:

    9781475532159

  • ISSN:

    1018-5941

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