Tell me your views on the control under RMB capital.

Rethinking the convertibility of RMB capital account is the inevitable result of the development of market economy under the background of globalization. Because the liberalized market economy has never got rid of all kinds of crises and ups and downs since its birth, we don't need to wait until all macroeconomic conditions and micro-subject conditions are completely met before considering capital account convertibility. Judging from the core indicators such as China's comprehensive national strength, macro-control ability, financial system and participation in international coordination mechanism, the conditions are basically mature. When we encounter a crisis, we should not stop. Not every country that realizes capital account convertibility has a financial crisis, and capital account convertibility is not the only reason for the financial crisis. Every institutional change has risks, and we will always face uncertainty. With the deepening of globalization, we can no longer be alone. The repeated financial crises around the world constantly send signals to the international financial order, and at the same time provide rich experience in risk prevention for countries, which is extremely beneficial to the further improvement of the international economic environment and a good opportunity to realize the free convertibility of RMB.

First, the necessity of RMB capital account convertibility

(1) The internal needs of China's economic development and the need to improve the international status of RMB.

After 30 years of reform and opening up, China has become an open economy, and its dependence on foreign trade has reached 66%. However, due to the non-convertibility of RMB capital account, its financial openness is extremely disproportionate to its comprehensive national strength, international economic status and international image, which seriously affects the international status of RMB. The financial openness of China in 2007 was 109.4%, which was significantly lower than that of developed countries and some developing countries. Generally, per capita GDP is positively correlated with financial openness. According to this law, China's current GDP per capita corresponds to 180% financial openness, which to a great extent shows that China's capital controls have obviously inhibited capital transactions (Cao Chuilong 2006). In 2008, China has become the third largest economy in the world. As early as 2006, most of the world's major economies realized free currency exchange. The degree of internationalization of RMB has changed from only being used as a means of payment for small-scale border trade to being used as a trade settlement currency between China's southeast coastal areas, Hong Kong, Macao and Southeast Asian countries, which will inevitably promote the overseas capitalization of RMB and increase the speed of RMB becoming an international reserve currency. If capital account convertibility cannot be realized, it will seriously affect the further improvement of RMB's international status.

(B) the need to improve the RMB exchange rate formation mechanism

The RMB exchange rate system and its level have been the focus of debate at home and abroad. On July 2, 2005, the exchange rate reform of 2 1 made the RMB exchange rate market a big step, and also made all sectors of society full of expectations for its rational development. However, because the foreign exchange market has not yet been in line with international standards, its further development has been limited. The marketization of exchange rate depends on the development of foreign exchange market, and the development of foreign exchange market and currency convertibility are mutual conditions and foundations. The foreign exchange market is not perfect without the free participation of a wide range of trading subjects, so capital account convertibility is an important condition to improve the exchange rate formation mechanism.

(C) the need to improve the efficiency of resource allocation and enhance the competitiveness of enterprises

At present, enterprises in China have faced the pressure of international competition brought by economic globalization. It is realistic for some people to summarize the market characteristics faced by China as "domestic competition and internationalization of domestic competition". China has introduced foreign direct investment for many years, and 480 of the world's top 500 enterprises have invested in China. Since the end of 2006, according to the requirements of WTO, China has fully opened the field of financial services, and domestic financial institutions have been in international competition. The convertibility of RMB capital account can make it easier for China residents to obtain foreign financial products and services, and at the same time, it can also introduce a real international competition mechanism for the domestic financial industry, paving the way for China enterprises to "go global".

(D) the need to reduce the cost of foreign exchange control

With the expansion of China's opening to the outside world, it is more and more difficult to control foreign exchange in capital projects, and the management efficiency is declining. Since 2004, the appreciation of RMB has led to a considerable amount of short-term capital inflows, and all sectors of society have basically reached an understanding, but there are no effective monitoring measures. A large number of short-term funds flowed in and out smoothly through deregulation channels such as current account transactions and foreign direct investment, which had a certain impact on China's financial market and monetary policy. The sharp fluctuations in the current account and capital account balances since 2004 can show that the capital flow during this period is very abnormal (see chart 1). Capital account convertibility can not only destroy the living soil of foreign exchange black market, block the gray foreign exchange trading channels, but also save the cost of foreign exchange control, and how to effectively supervise and use the "hot money" that will turn from darkness to light is the direction of efforts.

Second, the current situation of RMB capital account convertibility

According to statistics, among the 43 capital transactions classified by the International Monetary Fund, 20 to 30 are basically unrestricted or less restricted, and the RMB capital account has been partially convertible. Judging from the composition of the balance of payments, the free convertibility of capital account can be summarized as: canceling the import and export and exchange restrictions of direct investment. Cancel the restrictions on securities investment and exchange, credit financing and foreign exchange market access. Before 2002, China's capital account revenue and expenditure was less than US$ 200 billion, which increased to US$1770.3 billion in 2007, 54 times as much as that of 1985, and its proportion in the total balance of payments was also increasing year by year, reaching 4 1% in 2007, indicating that the opening of capital account is accelerating.

(a) Areas are still limited.

By the end of 2008, 480 of the world's top 500 enterprises had invested in China, and the total number of foreign-invested enterprises reached 655,000, and the actually utilized foreign capital reached 859.775 billion US dollars. At the same time, foreign direct investment by domestic institutions is gradually relaxed. Foreign direct investment by domestic institutions needs to be approved by relevant departments, and the foreign exchange administration department is responsible for its foreign exchange sources and investment risks. By the end of 2007, more than 7,000 non-bank investors in China had invested overseas in 1.72 countries, with 1.2 million registered enterprises, with an investment of 90.63 billion US dollars.

(2) In terms of securities investment.

Foreign investors are allowed to buy B shares in China, as well as foreign currency stocks such as H shares and B shares listed outside China and foreign currency bonds issued abroad, but they are restricted from directly buying A shares, bonds and money market instruments in China. Qualified foreign institutional investors (QFII) can buy A shares, while residents can buy B shares. Qualified domestic institutional investor (QDII) purchases, sells and issues capital and money market instruments overseas. As of June 5438+February, 2008, 1 * * 72 funds have obtained QFII qualification. In 2003, the International Finance Corporation issued "Panda" bonds in China, which was an attempt by non-residents to issue bonds in China. By the end of 2006, 1 2 funds had obtained QDII qualification. By the end of 2007, 140 China enterprises had been listed on overseas stock exchanges (Caijing.com 2008). In August 2007, China tried to open domestic individual direct foreign securities investment business (Hong Kong through train) with Hong Kong as the window, but it was later stopped. With the increasing demand for RMB settlement in the Hong Kong market, the voice of continuing to develop RMB offshore financial business in Hong Kong is gradually rising.

(3) Cross-border lending

Lending activities other than trade credit are still strictly controlled. For example, according to the Interim Measures for Foreign Debt Management, which came into effect on March 1 2003, the National Development and Reform Commission, together with relevant departments, formulated a national foreign debt borrowing plan to reasonably determine the total amount and structural control targets of full-caliber foreign debt.

(4) foreign exchange market.

Since 2005, the infrastructure of the foreign exchange market has been further improved. In 2005, the inter-bank RMB foreign exchange forward business was launched: in June 5438+ 10, 2006, the market maker system was introduced, and the inquiry trading mode was carried out, and the pilot business of individual local and foreign currency exchange franchise was approved in Pudong, Shanghai and Beijing. The main body of foreign exchange trading has expanded, but it is still limited to domestic financial and non-financial institutions (including domestic and foreign-funded institutions): the trading system was updated in April 2007, and RMB foreign exchange swap business and interest rate swap were launched in August 2007. By the end of 2007, there were 268 members in the foreign exchange market, and the foreign exchange transaction volume reached 2.26 trillion US dollars. In addition, in April 2008, the willingness of domestic enterprises to settle foreign exchange was realized, and the amount of foreign exchange purchased by individuals was relaxed, which basically met the foreign exchange needs of enterprises and individuals under current account. Non-residents are still prohibited from entering the China foreign exchange market, and residents are prohibited from entering the international foreign exchange market. Domestic individuals can only make firm transactions through commercial banks.

The main characteristics of China's capital account control are: first, it is stricter on securities investment, derivatives and loans, and looser on direct investment; Second, it is stricter on capital outflow and looser on capital inflow; 3. The control of local and foreign currency exchange is strict, but the control of cross-border capital flow is loose. Fourth, strict control policies, and a list of positive projects. It is these asymmetric control policies that hinder the capital flow of domestic enterprises and individuals, such as investment and financing, insurance prevention, etc., and also provide opportunities for the formation of a large number of black market transactions and gray capital flow channels at home and abroad.

3. Rethinking the convertibility conditions of RMB capital account

(A) Different views on the preconditions of RMB capital account convertibility

In the literature, there are many views on the preconditions for the opening of capital projects, which can be summarized into three categories:

1, comprehensive economic indicators. Including macroeconomic stability, micro-subject competitiveness and market mechanism, appropriate exchange rate system and exchange rate level, complete financial system and sufficient foreign exchange reserves. The above is summarized according to the basic conditions listed by the International Monetary Fund. Those who advocate slowing down the convertibility of RMB under capital account believe that although China's economy has been growing steadily for nearly 30 years, and its macroeconomic foundation, market mechanism, financial situation and international reserves are basically available, China's microeconomic entities, financial supervision level, foreign exchange market and RMB exchange rate formation mechanism are still unable to meet the conditions for the convertibility of capital account.

2. The international competitiveness of the industry is the most basic premise. Its main point is that industrial competitiveness is actually the level of science and technology and the innovation ability of enterprises. The convertibility of capital account needs the infrastructure of market economy, and more importantly, it needs to ensure the coordination of various policies that can make the opening up sustainable, while the latter needs the industrial competitiveness of the country to ensure it (Qiu Chongming 2006). He believes that due to the low industrial competitiveness of China, the convertibility of capital account should be slowed down, and it is necessary to practice internal strength before further opening up.

3. System is the basis for determining many conditions. For example, Professor Jiang Chun believes that the convertibility of RMB capital account depends on the reform of property right system, and the macro and micro economic situation is the result of the reform rather than a prerequisite. However, the reform of property right system in China is not complete, so the conditions for RMB convertibility are not yet mature.

In addition, there are some empirical studies on the relationship between domestic economic development and capital account convertibility at home and abroad. The economic growth of representative countries with open capital account is better than that of countries with strict capital account control. However, only when a country's economic development reaches a certain level can the opening of capital account have a positive impact on economic growth (Edwards 2001); China's financial development is not necessarily a necessary prerequisite for the opening of the capital account. On the contrary, the opening of capital account has a significant and stable positive impact on a country's financial development. Both capital account opening and institutional reform can promote financial development, but there is a significant negative correlation between their interaction and financial development, which makes the overall promotion of capital account opening to financial development not very obvious (Xiong Xian 2008). This shows that the quality of the system does not meet the needs of capital account opening.

(2) The preconditions for China to realize the convertibility of RMB capital account have been met.

1. China's comprehensive national strength and reform achievements are a powerful guarantee for realizing the convertibility of RMB capital account. The convertibility of RMB capital account inevitably requires some preconditions. Today, the macroeconomic situation in China is stable, the financial system is relatively perfect, the foreign exchange reserves are sufficient, the RMB exchange rate system is relatively reasonable, and the socialist market mechanism is increasingly sound. According to the data at the end of 2008, China is the world's largest foreign exchange reserve country, the largest capital importer, the second largest capital exporter, the third largest trading country and the third largest economy. In 2006, its contribution rate to global economic growth reached 14.5%, second only to the United States' 22.8%. Ma Jiantang, director of the National Bureau of Statistics, said that in 2008, China had a great influence on the world. Moreover, China's macro-economy has been growing steadily for a long time, and the socialist market economy system and framework have been formed. The problems of non-performing assets ratio and capital adequacy ratio, which have long plagued China's banking industry, have been effectively solved, and the exchange rate reform and foreign exchange market reform have achieved good results. Coupled with the further improvement of RMB reputation and the financial supervision system formed under extensive international cooperation, it will be a powerful guarantee for the smooth realization of RMB capital account convertibility.

2. International experience shows that there is no uniform reference standard for capital account convertibility. There is no uniform quantitative index for the conditions of currency convertibility in the world. On the basis of horizontal comparison and experience summary with other countries that have successfully realized capital account convertibility, we can judge whether the conditions for capital account convertibility are met according to our domestic actual needs. Observing the process of capital account convertibility in developing countries in Latin America and Asia and countries in transition in Eastern Europe from 1960s to 1990s, the success and failure cases of different countries show that under normal circumstances, the effect of capital account convertibility in countries with strong economic foundation is certain without drastic changes in macroeconomic policies (Li Yao 2004).

Based on the above perspective, observing the basic situation of China's economy, it is not difficult to judge that the conditions for canceling capital account control are basically met.

We need to understand these situations from a dynamic perspective. No one can deny the fact that great changes have taken place. The pace of relaxing capital account foreign exchange control has never stopped, and it has been open to a greater extent. In a sense, the real "capital account convertibility" may be ahead of the policy, which implies that we need to change our thinking mode and management mode to meet the market demand. Capital account opening and its preconditions are not completely sequential, but more often they should be interactive and mutually reinforcing to a certain extent.

You don't need to wait until all the conditions are met. No matter the international environment or the changing China itself, many economic indicators are dynamic processes, so it is impossible to make accurate predictions. What we need to pay more attention to is whether the convertibility of RMB capital account is urgent. Apart from temporary control under special circumstances, capital account control is mostly the product of weak market economy foundation and foreign exchange shortage, so its existence value is getting smaller and smaller for China today.

5. The American financial crisis provides opportunities. There are different opinions on the evaluation of the US financial crisis and China's macroeconomic adjustment, as well as the prediction of the future, but there is also some consensus that the once-in-a-century crisis will bring some impact to China's export-oriented economy, but it will also bring once-in-a-century opportunities, such as: it can promote the effective reform of China's economy, win the opportunity to participate in international economic activities, and help promote the internationalization of RMB. On February 24th, 65438, the executive meeting in the State Council decided to "launch a pilot project of RMB settlement of goods trade between Guangdong and the Yangtze River Delta, Hong Kong and Macao, Guangxi and Yunnan and ASEAN". This means that the internationalization of RMB will make substantial progress, which also puts forward more urgent requirements for realizing convertibility under RMB capital.

China People's Bank's Report on International Financial Markets in 2007 pointed out that in the current domestic and international environment. China will relax the restrictions on capital account transactions, with the introduction and cultivation of capital market instruments as the main line. Under the premise of controllable risks, it will gradually and selectively relax the restrictions on capital account transactions in accordance with the principles of gradual progress, overall planning, easy before difficult, and leaving room, and gradually realize the convertibility of RMB capital account. According to this idea and the current reality, the convertibility of RMB capital this year is worth looking forward to.