The"Big and Small Arrangement"Puzzle and Solution of China's Capital Account Liberalization
Capital account liberalization is an important part of promoting high-level opening-up to the outside world,and it is given high hopes during the economic downturn.However,the inherent risks determine that the liberalization process must be handled with caution.The core issue of China's capital account liberalization is"big arrangements"and"small ar-rangements",wherein the former refers to its coordination with exchange rate liberalization and interest rate marketization,and the latter refers to the time and space arrangements for the liberalization of each sub-account.Given the insufficient state of the existing academic research,which is not comprehensive enough to fully guide the advancement of the two arrangements,a reasonable and practical solution is to first consolidate the consensus from existing research.Subsequently,aligned with the three stages of RMB internationalization,there is a need to organically combine the"top-level design"derived from academic research with the pragmatic approach of"crossing the river by feeling the stones".Such approach ensures both scientific rigor and practical feasibility in the overall design of capital account arrangement.The article further demonstrates that in practice,the following principles should be applied:coordinated progression,gradual trial and error,discretionary"hierarchical promo-tion",and phased retraction and adjustment.On the academic front,the future research directions should focus on the non-linear combination threshold model using machine learning and the institutional evolution simulation based on a large-country open-economy DSGE model.
Capital Account LiberalizationProgress PropellingRisk ControlPuzzle Solution
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