Financial openness of China and India: Implications for capital account liberalisation

Arbeitspapier

We gauge the de-facto capital account openness of the Chinese and Indian economies by testing the law of one price on the basis of onshore and offshore price gaps for three key financial instruments. Generally, the three measures show both economies becoming more financially open over time. Over the past decade, the Indian economy on average appears to be more open financially than the Chinese economy, but China seems to be catching up with India in the wake of the global financial crisis. Both have more work to do to open their capital accounts. Our price-based measures suggest strong inward pressure on Chinese money markets, in contrast to the consensus projection that China is likely to experience net private capital outflows when it thoroughly opens up financially. Policymakers need to monitor and to manage the risks along the dynamic path of capital account liberalisation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bruegel Working Paper ; No. 2014/05

Classification and Topics

• Classification: Wirtschaft ; Multinational Firms; International Business ; Foreign Exchange ; Financial Aspects of Economic Integration ; Economic Impacts of Globalization: Finance ; International Financial Markets
• Subject: capital account openness ; financial integration ; law of one price ; foreign exchange market ; currency internationalisation ; Chinn-Ito ; Lane-Milesi-Ferretti

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ma, Guonan ; McCauley, Robert N.
• Event: Veröffentlichung
• (who): Bruegel
• (where): Brussels
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/126703
• Last update: 10.03.2025, 11:45 AM CET