Journal of Chinese Political Science

, Volume 10, Issue 1, pp 65–79 | Cite as

Currency convertibility, cost of capital control and capital account liberalization in China

  • Robin Hang Luo
  • Chun Jiang


This paper provides a synthetic view of the capital account liberalization, capital control and currency convertibility issues in China. A quantitative analysis following Henry’s study1 fails to provide clear links between liberalization, diminishing capital controls and Chinese stock market returns. An institutional explanation is then offered to complement the quantitative analysis. We suggest that the property rights regime is an indispensable institutional variable when studying this topic. Originating from the current property rights regime; price distortion, moral hazard and monetary overhang are the main impediments towards capital account liberalization and full convertibility. Therefore, property rights reform should be given the first priority in Chinese economic reform.

Key words

Capital control China Convertibility Liberalization Property Rights 


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Copyright information

© Springer 2005

Authors and Affiliations

  • Robin Hang Luo
    • 1
    • 2
  • Chun Jiang
    • 3
    • 4
  1. 1.The Department of FinanceAuckland University of TechnologyNew Zealand
  2. 2.Economics from Nanyang Technological UniversitySingapore
  3. 3.the Financial Research Institute at Wuhan UniversityChina
  4. 4.Economics from Wuhan UniversityChina

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