Wednesday, March 09, 2005


As promised a while ago, here is some of my recent work on the role of China's capital account controls in its remarkable economic development of the past quarter century.

Despite being heralded as a model globalizer, China's economic evolution is more aptly described as a closed economy that as moved from a system of direct to indirect controls. These institutional changes have allowed greater efficiency in price determination and therefore resource allocation throughout most of the Chinese economy, however the Chinese government still retains elaborate and pervasive controls to mediate the movement of financial capital in and out of its economy. These controls on capital flows have been essential to China's remarkably stable macroeconomic performance, and thus to its long-wave of rapid economic growth--a conclusion that can be drawn from comparison with many of China's neighbors afflicted by financial crises in 1997-1998.

The paper also provides a succinct overview of the risks associated with liberalized international capital flows and the rationales for for proactive management of capital flows.


At 12:53 PM, Blogger Dave Meleney said...

Dear Adam:

I see you write about development in China and you used to be involved in bikes.... wish we could tour some of China's developing countryside together...doing it on a bike is the best way of all. Of course you meet kids who have amongst them enough English so you can have wonderful conversations and you can learn about the most remarkable dreams they have!

Your short essay on "How China Does It" seems to attribute their quintupling of personal income to a "closed economy with indirect controls." You've studied a lot more economics than I have, but I have spent a lot of time in China and its hard to understand your answer. It's very different from the answers you get from people over there. Aren't there a lot of countries with "closed economies and indirect controls" who aren't growing at all? On the ground, in China, it looks to me like they are getting less closed every month. What am I missing here?
Since there are still several billion people who are so poor they loose children to things like diarrhea, TB and measles, it is pretty important that we study carefully what is happening in China and India, I am sure you agree.
When you shop at Target or Walmart or Home Depot, don't you get the impression China is getting more and more open? In fact, I would suggest that it is the aggressive buyers for these chains and their suppliers who are pushing development and opportunity further and further into the hinterlands of China and giving more kids reason to dream those big dreams.

Thanks for listening,

Dave Meleney
Tree trimmer &
bonsai artist


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