Introduction
China’s growth since 1979 has been export-let and FDI- driven. At the same time the Chinese government has adopted a cautious attitude towards capital account liberalization. Owing to capital controls during the Asian financial crisis, although China’s financial system was as fragile as those crisis-affected countries in the region, if not worse, the Chinese currency (the RMB) escaped attacks by international speculators. In the wake of the Asian financial crisis, the pace of capital account liberalization in China slowed down, if not grind to a complete halt. Most of planned liberalization actions were shelved. However, since 2002, capital account liberalization has returned to policy agenda because of China’s commitment to open the financial services sector as a part of WTO entry commitments. Since 2003, the management of cross-border capital flows began to intertwine with Chinese monetary authorities’ efforts for reducing the appreciation pressure on the RMB. Currently, how to manage cross-border capital flows has become one of the most controversial issues in China. The author believes that the adequate management of cross-border capital flows holds the key for China’s success in the maintenance of a stable growth path. The paper is aimed at providing a comprehensive account of the evolution of China’s management of capital flows and analyzing possible trajectories of the management of capital flows in the future. The main theme of the paper is that liberalization of capital controls should be treated as part of the long term program of China’s economic reform and opening up, and should not be subject to the need for reducing pressure on RMB appreciation. There is still long way to go for the complete convertibility of the RMB, due to the insufficiency of China’s institutional reform. The stabilization of the RMB should not be achieved at the expense of losing control on capital flows. The first section of the paper is a short introduction of the evolution of China’s management of capital flows. The second section discusses China’s imbalances of international balance of payments and China’s exchange rate policy. The third section discusses the interaction between macroeconomic stability and the management of capital flows under the given exchange rate policy. The fourth section is devoted to future direction of China’s management of capital flows. The last section is a short conclusion.

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原文提交给亚洲开发银行研究院2007年12月关于资本项目管制的学术会议