Chelsky, Jeff2012-08-132012-08-132012-02https://hdl.handle.net/10986/10054The initial post World War II pursuit of capital account liberalization (CAL) by advanced economies was Europe-centric, with roots in a broader political rather than economic agenda of greater European integration. In continental Europe, CAL was addressed mostly through the adoption of multilateral instruments and codes. In contrast, CAL by the United States and United Kingdom was pursued unilaterally, motivated by their status as global reserve currency issuers and global financial centers. China's situation is fundamentally different. China today has no equivalent to the European political motivation for CAL or the domestically driven financial motivation of the United States or the United Kingdom. And while China may have long-term aspirations to be a global reserve currency issuer, the extent to which it internationalizes its currency is constrained by powerful domestic economic and political interests that continue to benefit from an export-led growth model underpinned by a pegged and undervalued exchange rate, both of which are difficult to maintain with an open capital account. Alongside China's overarching concern with the maintenance of financial and economic stability, these factors imply a different path for China than paths taken by advanced economies, with significant acceleration in the gradual pace of liberalization unlikely without accelerated development of domestic constituencies that traditionally support CAL.CC BY 3.0 IGOADVANCED COUNTRIESADVANCED COUNTRYADVANCED ECONOMIESADVANCED ECONOMYBASKET COMPOSITIONBONDBOND MARKETBORDER CAPITAL FLOWSCAPITAL ACCOUNTCAPITAL ACCOUNT CONVERTIBILITYCAPITAL ACCOUNT LIBERALIZATIONCAPITAL CONTROLSCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETCAPITAL MARKET LIBERALIZATIONCAPITAL MARKETSCAPITAL MOVEMENTCAPITAL MOVEMENTSCAPITAL RULESCOMMON MARKETCOMMUNICATIONS TECHNOLOGYCOMPETITIVE DEVALUATIONCOMPETITIVE DEVALUATIONSCOMPLEX INSTRUMENTSCROSS-BORDER CAPITALCURRENCY BASKETCURRENT ACCOUNTCURRENT ACCOUNT CONVERTIBILITYCURRENT ACCOUNT TRANSACTIONSDEPOSITSDEREGULATIONDEVELOPING COUNTRIESDOMESTIC BONDSDOMESTIC FINANCIAL SECTORDOMESTIC INSTITUTIONAL INVESTORECONOMIC DISRUPTIONECONOMIC GROWTHECONOMIC POLICYECONOMIC STABILITYEXCHANGE RATEFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL FLOWSFINANCIAL INNOVATIONFINANCIAL INSTITUTIONSFINANCIAL MARKETSFINANCIAL SECTOR DEVELOPMENTFINANCIAL SYSTEMFIXED EXCHANGE RATESFLOATING EXCHANGE RATEFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN INSTITUTIONAL INVESTORFORWARD MARKETGLOBAL FINANCEGLOBAL FINANCIAL CENTERSGLOBAL FINANCIAL FLOWSHOLDINGSINSTITUTIONAL INVESTORINSURANCEINSURANCE COMPANIESINTERNATIONAL MONETARY FUNDINTERNATIONAL RESERVEISSUANCELIBERALIZATION OF CAPITALLIBERALIZATION OF CAPITAL MOVEMENTSLIBERALIZATION OF TRADEMARKET ACCESSMARKET HOLDINGSMONETARY FUNDMOVEMENT OF CAPITALOPEN CAPITAL ACCOUNTPEER PRESSUREPERIODS OF STRESSPOLITICAL ECONOMYPOVERTY REDUCTIONPRIVATE DOMESTICPRIVATE FINANCIAL SECTORPUBLIC SECTORSRESERVE CURRENCYSECURITIESSECURITIES MARKETSHORT-TERM CAPITALSINGLE MARKETSINGLE_MARKETSOCIAL DEVELOPMENTSTOCK MARKETTRADINGTRANSPARENCYTREATYUNILATERAL LIBERALIZATIONWorld Bank10.1596/10054