Since a sense, capital account management is the exchange rate system as a supplement, developed in China toward a fully floating exchange rate, before the principles of how to clear the capital account management, financial strategy of the Chinese exchange rate after the relay must be clear that a major problem.

By a large number of international scholars, empirical research, capital account liberalization can indeed promote economic development. However, this is conditional. If the assumption does not hold the same effect on economic growth is uncertain. Since the 70s of last century from the national currency, the financial crisis causes and mechanism of view, formed after the collapse of the Bretton Woods system, and continues today in the international monetary, exchange rate system is an important reason for the crisis. From the crisis country’s internal policy perspective, does not deal with the exchange rate, capital account liberalization and domestic economic and financial reform, the relationship between, it is the crisis of the important underlying reasons. Capital Account Liberalization and the relationship between the crisis, not simply the “trigger” or “prevent” the relationship. But capital account liberalization on the financial crisis has some catalytic role.

IMF survey of 35 economies reviewed the lessons of financial liberalization in 24 countries in crisis, there are 13 in the 5 years before the crisis to complete the process of capital account liberalization. Also on a serious crisis in which 14 countries for further investigation, found that 9 crisis, net capital inflow in 2 to 4 years before the crisis was a significant increase over the GDP3% mark. Of course, capital account controls to some extent also the prevention of international capital flows exception occurs, help to cope with weak financial sector, caused by a variety of risks. In a country’s economic structure or mechanism in depth the case of distorted exchange rate system and the different combinations of capital account liberalization, the impact on macroeconomic stability varies.

Therefore, the choice of exchange rate regime, capital account liberalization is often the situation needs to be as important to consider the economic background or characteristics. From international experience, in general, all in a fully open capital account system of flexible exchange rates before the country obtained a better mid-term results. Serious imbalance in the exchange rate environment, the effect of capital account controls will be greatly reduced. Or that serious disorders in the exchange rate arbitrage income is large enough, the effectiveness of capital controls will decline rapidly.

The 80s in Argentina, Chile, Mexico, Venezuela and 90 in Thailand, India, cases were confirmed from both positive and negative aspects of the correctness of this view. In fact, from the collapse of the Bretton Woods system, the relevant States to adopt a floating exchange rate system among the United States, Canada, Switzerland, the capital three hours earlier, the other developed countries are in a long time after the accumulation of floating exchange rate experience of gradually opening up. Japan 1980, Germany, 1981, 1983, Australia, New Zealand, 1984, Sweden 1989, France 1989, Italy 1990, Spain in 1992, Iceland 1995.

In China’s future, we must adhere to the open capital account, it is because China’s economic globalization requires the cooperation of financial globalization; facing China’s future economic and financial development of the major challenges on the international financial market environment to solve, such as environment, resource constraints, household wealth accumulation after the high return on investment; RMB internationalization strategy needs to further open the capital account of the match; and openness with the expansion of the market, after declining effectiveness of capital account controls the choice of last resort. Must also see that the full liberalization of capital account was not any to meet a variety of conditions. Simply expand the market boundaries, does not give the efficiency of local markets. If you do not adhere to the “we” principle, may be forced into other markets, not only will not improve the efficiency of the local market, and even have a negative impact.

Therefore, adherence to the initiative, gradual and controllable, the core of China’s principle of opening up the capital account. The core principle embodied in the five main areas:

First, expand the range of the RMB exchange rate fluctuations to a certain extent, and in the fundamental equilibrium exchange rate to reach the market before, are still advised to maintain a certain scale of capital movement control.

Second, capital account liberalization must be familiar with the process of reform of the domestic market of convergence. These include: elements of the price mechanism reform, service sector reform, transformation of government functions and tax system reform and financial sector fully market-oriented reforms, including financial markets, making the inherent information asymmetry caused by the externality, or to control the market affordable range.

Third, capital account opening should be combined with the process of regionalization of RMB. Although the capital account liberalization can not be RMB regionalization as a single goal, but along the main line of RMB regionalization, mutual cooperation, and gradually realized. In the next few years, both open capital account in foreign currency-based environment to achieve, can also be a gradual realization of the renminbi-based environment. This may be different from the general opening up of China’s capital account the significant features of the transition countries. In principle, all the future to allow foreign currency cross-border flows of capital projects, should allow the yuan to be. On the deregulation, if the same situation, the RMB should be open to cross-border transactions in foreign currency denominated transactions open.

Fourth, capital account liberalization and strengthen the macro-prudential regulation to enhance the flexibility to adapt to macro-control. Specifically, the face of gradually opening up the huge cross-border capital flows and the enormous potential arbitrage pressure, often have the original to the number of administrative regulation and control dominated the effectiveness of macro-control plummeting phenomenon. Therefore, we must fully prepared to shift to the implementation of macro-control means prices indirectly (in incentive and restrictive mechanism-based) tool to control the main.

Fifth, different times, different types of cross-border capital flows, should adopt different control ideas. Among them, the illegal and outflow of funds due to political factors in, not the usual approach to management of capital flow management, but should be resolved through the anti-money laundering.

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Last month, the criticism of U.S. economic policy really hot. Fuse is the Federal Reserve announced the second round of quantitative easing policy, decided to purchase 600 billion U.S. dollars by mid-term bonds. The decision was severely criticized in Europe because it means the dollar, euro, this is precisely would the fetters of the European economy. G20 summit in Seoul, German Finance Minister said the U.S. policy of “mindless.” This is not rhetoric for allies. The emerging market countries, regardless of Brazil or China, have criticized the Fed to further ease monetary policy will lead to more capital inflows, which is add fuel to the fire.

Foreign critics of escalating criticism of the Fed, in fact, dissatisfaction with the erroneous policy of the United States. The current U.S. economic recovery is still weak: economic growth rate barely reaches 2%, while the unemployment rate rise again. This means that the U.S. economy is in urgent need for policy support. Because the U.S. “lame duck Congress to” do not want to provide useful financial support, the Fed has become the final decision-makers backing.

Not long ago, Fed Chairman Ben Bernanke in a speech in Frankfurt on the so frankly stated. He said that in order to defend the Fed, he personally would rather see the U.S. fiscal policy to stimulate the economy. But because Congress can not act on this, the Federal Reserve by the Department of its responsibilities, an obligation to do something.

Root of the problem, the U.S. Congress led to financial failure, not the second round of the quantitative easing policy. The real finger of blame should point to the outside world is that the financial failure. If you are a little bit of additional fiscal stimulus is provided, you can ensure that the U.S. economy is unlikely to stall down, or even slide into the abyss of deflation. If you take reduced payroll taxes to provide training for the long-term unemployed, new investment projects to accelerate the depreciation allowances and other measures, will promote both employment and productivity growth.

Foreign policy makers would like to see faster growth in the U.S. economy rather than the second bottom. In their view, instead of relying on fiscal policy easing, not only can stimulate economic growth in the United States in 2011, will the dollar’s rise rather than fall, which would ease the domestic competitive depreciation of the United States intends to concerns.

However, unless accompanied by the introduction of a credible medium-term balanced budget plan, or increased public spending now will only make the market setback, but not worth cheering.

All of these proposals is to remind observers – including the United States to foreign creditors, the medium term, the United States not only has serious financial problems, but have not yet begun to address. And if the U.S. does not take any measures to go on like this, after five years, investors may lose confidence in the value of U.S. Treasury bonds. If they find that U.S. politicians are reluctant to be determined to solve their financial problems, they will collectively sell U.S. Treasury bonds. This means that the foreign exchange market will be big riots, including China, holder of U.S. Treasury bonds, will also suffer huge losses.

The same fact is that the future control within the United States failed to agree on budget deficit and proposed a plan to solve the problem, making the United States can not implement fiscal policies to support economic development. However, this support was forced by reality.

So far, criticism of U.S. economic policy has been enough. However, as only the second round focused on the Fed and its quantitative easing policy, not the U.S. financial predicament, the foreign policy makers are moving in the wrong target fire.

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