Set the Money Free; China's Capital Controls  

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Jenis: Article from Bulletin/Magazine
Dalam koleksi: The Economist (http://search.proquest.com/) vol. 402 no. 8774 (Mar. 2012), page 14-16.
Topik: Economic Growth; Economic Policy; Financial Services; Capital Movement; Risk

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Perpustakaan Pusat (Semanggi) Nomor Panggil: EE29.70 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Cheap capital has been crucial to China's rise. The country's growth has been fuelled by banks sucking up plentiful household savings and pumping them into not-always-deserving industry, including big, state-owned borrowers. There are costs to this approach. The skewed interest rates offered by China's banks represent a tax on depositors and a subsidy for industry. They distort the economy, suppressing consumption, services and private business in favour of investment, industry and the state. Savers seeking to avoid being fleeced by the country's banks inflate housing bubbles instead. And controls on capital outflows prevent sound investments abroad, resulting in large and dangerous piles of foreign-currency reserves. Ultimately, putting this right requires China to accept freer movement of capital within its borders, and across them. Yet opening a financial system to the outside world carries dramatic risks--witness the tide of hot money into China's neighbours that led to the Asian financial crisis at the end of the 1990s. How, then, should China chart a safe course?

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