Internal And External Pressure Of Rmb Under Capital Account Liberalization,

Capital Account Liberalization is a crucial and running issue faced by many nations in the world including China. Along with the gradual opening of Chinese markets and reforms of economy, from a long run, the only choice of China's foreign exchange management system reforms will be gradually and prudently opening the capital market, loosening controls of capital accounts and eternally achieve completely free convertibility of RMB. Aware of recent trends from both domestic and international economies, the external and internal pressures for loosening controls of China's capital accounts have reached a crucial level. Internally, the dramatic increase of foreign exchange reserves leads to headache problems such as excess liquidity, inflation pressure and urge of RMB appreciation. Under the unsolved situation of current account surplus relief, the balance of international payments could be reached by outflows under capital accounts, thus we need phased opening of China's capital accounts. Externally, many countries ascribe the crisis of global economic imbalances to the undervaluation of RMB. However, the RMB exchange rate reform policy insists on independence, controllability and gradualism, the harm of rapid appreciation is unaffordable to China. Thus, along with the same internal pressure, some developed countries such as the United States partially transfer their requirement of RMB appreciation to the requirement of opening the capital accounts. On the other hand, any country might endure baptisms during the opening of their capital accounts, we must prudently consider many important issues such as what kinds of risks would there be and how to avoid as much as all the risks by policy adjustments. This article will discuss the internal and external pressures of opening China's capital accounts based on current economic status of China, and also will compare the loss and gains from other countries on opening of their capital accounts and capital markets, then finally try to discover the practical risks and countermeasures of evading the risks.