22. Approves the establishment of a working capital reserve of 45 million dollars under the capital master plan account, to be operated under the terms of financial regulations 3.5, 4.2 and 4.3

Depending on how soon China opens up its capital account and develops its financial markets, the renminbi could become a significant reserve currency in the near future.

(c) Section Chapter IV presents the status of the working capital reserve

1 This balance includes working capital reserve brought forward from 2002 2003.

The Temptation of China s Capital Account

Even more extraordinarily, when these new currencies emerged as the new claimants to reserve status, they had only recently become convertible for current account transactions, and capital flows were still restricted.

Now, just as the US Federal Reserve contemplates an exit from its unconventional monetary policies, emerging economies current account positions are weakening, making their reliance on capital inflows increasingly apparent and increasingly dangerous.

(c) Income derived from investments pertaining to trust funds reserve and special accounts shall be credited to the trust fund, reserve or special account concerned.

The financing of the support account included the 13,790,000 excess balance of the Peacekeeping Reserve Fund.

Banks will have to recognize the losses and, if necessary, find the additional capital to meet reserve requirements.

It undertook reserve accumulation in the late 1990 s as a form of self insurance against capital flight.

This is why capital account regulations are allowed under IMF rules, and why the attempt to introduce capital account convertibility into the IMF s Articles of Agreement was defeated in 1997.

Global integration of China s financial sector will require opening the capital account, which will have to be carried out steadily and with considerable care but it will be a key step toward internationalizing the renminbi as a global reserve currency.

Second, much will depend on how China navigates the transition to a more open capital account. History is littered with financial crises occurring in the wake of precipitous capital account liberalization.

It is anticipated that at the end of 2005 the required working capital reserve will be approximately US 868,000.

Kaduang has posted an eyewitness account of yesterdays happening in capital Yangoon.

It is time to add managing the capital account to this list.

A substitution account, housed at the IMF, would enable countries to convert their existing reserve holdings into SDRs.

Over the last two years, the Agency has built up a working capital reserve equal to one month's operational requirements.

It is hard to argue that the RMB is not undervalued, given China s large and persistent current account and capital account surpluses.

That would be very difficult to manage without some form of capital account regulation.

It then cites global current account imbalances, particularly the US external deficit, describing it as unprecedented for a reserve currency country to have a current account deficit of such magnitude.

A country with current account and capital account surpluses and increasing foreign exchange reserves normally sees an excessive money supply and high inflation.

China has a two tier system in which the capital account is strictly controlled most other currencies don t distinguish between current and capital accounts.

Ben Bernanke, the US Federal Reserve chairman, once famously pinned the whole US current account deficit on a global savings glut.

History is littered with financial crises occurring in the wake of precipitous capital account liberalization.

A country that has a balanced current account does not need any additional foreign capital.

With current and capital account surpluses, the renminbi s exchange rate is still under upward pressure.

1 The amount required to bring the working capital reserve up to 8.3 per cent of the total annual programmes cost plus overhead.

In allocating groundwater resources, account should be taken of the amount of groundwater in reserve and of the rate of its replenishment.

Second, much will depend on how China navigates the transition to a more open capital account.

A serious discussion of global capital account regulations would benefit both advanced and emerging market economies.

Progress in institution building is also important for a well sequenced liberalisation of the capital account.

They have considerable flexibility, owing to a range of policy tools, including variable capital and reserve requirements and direct controls on mortgage lending terms.

The purpose of the working capital reserve shall be to ensure the continuity of operations in the event of a temporary shortfall of cash.

Programme support costs (overhead charge) and working capital reserve In accordance with the financial procedures (decision 15 CP.1), the Convention budget is required to provide for 13 per cent of the programme expenditures as overhead charge, and to maintain a working capital reserve of 8.3 per cent of the Convention budget (one month of operating requirements).

But whether renminbi appreciation will work depends on reducing China s net capital inflows and current account surplus.

NEW YORK Capital account regulations have been at the center of global financial debates for two years.

A much better way forward is to rethink seriously the role of cross border capital account regulations.

Doing so will require maintaining some capital account control, while raising interest rates to market clearing levels.

On April 1994, the capital was moved again to its present location on account of political considerations.

This obvious externality required policy responses in the emerging countries limits on capital inflows, reserve accumulation, and measures to restrict credit and restrain asset price inflation.

Thus, the IMF s recommendation to use capital controls only after exhausting interest rate adjustment, reserve accumulation, and prudential regulation is out of step with the profession.

As such, the timing could not be worse to float the idea of speeding up capital account liberalization.

The Asian financial crisis persuaded China s leaders to shelve plans, launched in 1994, to liberalize the capital account.