Finally, any regulation in this area should recognize that capital account convertibility is not obligatory for the IMF s clients.

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.

There was also significant mobility of capital and full convertibility.

But the market forces that cause those currencies to appreciate do not work on the renminbi, because China has only very limited capital account convertibility.

China moved to current account convertibility in 1996, but retained a substantial number of controls on capital movements, which have served as a shield against financial contagion.

Germany had moved to current account convertibility in 1958, but Japan only in 1964.

China moved to current account convertibility in 1996, but retained a substantial number of controls on capital movements, which have served as a shield against financial contagion. Are these still needed?

Its chief attractions were convertibility of a wide range of foreign currencies and no taxes on income and capital gains.

In fact, it was clear that the culprits were the International Monetary Fund and the US Treasury, which had encouraged a shift to capital account convertibility without understanding that the case for free capital flows was not symmetrical with the case for free trade.

The Temptation of China s Capital Account

Working Capital Fund and Special Account

However, it had managed to contain inflation, while at the same time introducing full convertibility of the rupee on the trade account.

A. GENERAL FUND, WORKING CAPITAL FUND AND SPECIAL ACCOUNT

During the 1990s, capital account liberalization and high capital account volatility greatly increased the need for official liquidity to deal with sudden and large reversals of flows.

Given the evidence that capital account liberalization increases macroeconomic volatility, many developing countries have experimented with capital controls.

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

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

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.

General Fund cash flow (usable cash), including Working Capital Fund and Special Account

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

payments a profits and interest c account d of capital e Global balance f

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

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.

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

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.

In January 2002, the Government announced the end of the currency convertibility regime.

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.

The requirement for exporters to surrender 75 per cent of foreign currency proceeds was lifted in December 2004, and in January 2005 Egypt accepted the IMF Article VIII obligation to maintain current account convertibility.

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 dataset takes account of only the approved equity capital for projects in production and under implementation, not actual, and does not cover reinvested earnings and other capital.

Particularly damaging is the 17.7 billion in foreign exchange reserves that France keeps in a special Treasury account at an interest rate of only 1.5 , thereby guaranteeing the convertibility of the CFA franc, which it underwrites.

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.

Most economists in China seem to support the PBOC s stance, citing the potential benefits of capital account liberalization.

To be sure, a cautious approach should not be allowed to impede incremental progress toward capital account liberalization.

In the recent IMF document, the Fund proposes a set of guidelines that countries should use for capital account regulations (which they call capital flow management measures, or CFMs).

But it is just as essential that developing countries maintain an appropriate degree of policy autonomy in managing capital flows and choosing whatever capital account regime they deem appropriate.