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Chinese Capital Flows and Capital Account Liberalisation

Author

Listed:
  • Eden Hatzvi

    (Reserve Bank of Australia)

  • Jessica Meredith

    (Reserve Bank of Australia)

  • William Nixon

    (Reserve Bank of Australia)

Abstract

Chinese private capital flows are dominated by foreign direct investment and banking-related flows, with portfolio flows remaining relatively small (as a share of GDP). Of these components, banking-related flows account for the majority of the cyclical variation in total flows and seem to be driven by expected changes in the exchange rate. Both the composition of capital flows and the factors that drive their variation are likely to change as the Chinese authorities gradually open the capital account in line with their stated intention. Given the size of China’s economy, the implications of a continued opening of its capital account and a significant increase in capital flows are potentially very large. They include a greater influence of global financial conditions on China (and vice versa), a change in the composition of China’s net foreign assets, and a change in the nature of the economic and financial risks facing China.

Suggested Citation

  • Eden Hatzvi & Jessica Meredith & William Nixon, 2015. "Chinese Capital Flows and Capital Account Liberalisation," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 39-48, December.
    • Handle: RePEc:rba:rbabul:dec2015-05
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2015/dec/pdf/bu-1215-5.pdf
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    References listed on IDEAS

    as
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    7. Mr. Tamim Bayoumi & Ms. Franziska L Ohnsorge, 2013. "Do Inflows or Outflows Dominate? Global Implications of Capital Account Liberalization in China," IMF Working Papers 2013/189, International Monetary Fund.
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    Cited by:

    1. Sasha Kofanova & Aaron Walker & Eden Hatzvi, 2015. "US Dollar Debt of Emerging Market Firms," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 49-58, December.
    2. Isha Agarwal & Grace Weishi Gu & Eswar S. Prasad, 2019. "China’s Impact on Global Financial Markets," NBER Working Papers 26311, National Bureau of Economic Research, Inc.
    3. Florian LALANNE & Irena PERESA & Sophie RIVAUD, 2019. "Portfolio investments and fragility in emerging economies: detection tools [Investissements de portefeuille et fragilisation des pays émergents : des outils de détection]," Bulletin de la Banque de France, Banque de France, issue 226.
    4. Immaculate Simiso Nxumalo & Patricia Lindelwa Makoni, 2021. "Analysis of International Capital Inflows and Institutional Quality in Emerging Markets," Economies, MDPI, vol. 9(4), pages 1-16, November.
    5. Isha Agarwal & Grace Weishi Gu & Eswar Prasad, 0. "The Determinants of China’s International Portfolio Equity Allocations," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 0, pages 1-50.
    6. Isha Agarwal & Grace Weishi Gu & Eswar Prasad, 2020. "The Determinants of China’s International Portfolio Equity Allocations," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(3), pages 643-692, September.
    7. Rose Cunningham & Eden Hatzvi & Kun Mo, 2018. "The Size and Destination of China's Portfolio Outflows," Discussion Papers 18-11, Bank of Canada.

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