If China opens the capital account before it reforms its SOEs, foreign lending may help feed their investment hunger.
By opening the capital account soon, China could claim several prizes, reformers argue.
Opening up the capital account would attract a lot of hot, speculative money, just as it did in the rest of Asia in the early 1990s.
ECONOMIST: Will China float the yuan, revalue it up a bit, or neither?
Last January, Yi Gang, the head of the State Administration of Foreign Exchange, stated that China would make the renminbi convertible on the capital account in five years.
These subjects, which each receive a chapter in the report, differ markedly from last year's CEA outlook, which highlighted the capital account surplus, workforce skills, retirement savings, intellectual property and agriculture.
Two factors made this approach work at Goldman: partners saw their money in the capital account grow at an incredible rate under Mr Weinberg's leadership, and, perhaps as important, he set a selfless example.
Then last month the chief of the State Administration of Foreign Exchange, a division of the central bank, removed any ambiguity when he stated that China would make the renminbi convertible on the capital account in five years.
Key reforms that would open up the country's financial sector such as the liberalization of interest rates and the opening of the capital account have been put on the back burner, and the timeline for their realization is uncertain.
This makes them consistent with other measures to relax restrictions on the capital account such as the expansion of the Qualified Foreign Institutional Investor scheme, which allows foreigners to bring portfolio investment capital into China but only in a carefully regulated manner.
According to Martin Neil Baily, a senior fellow at the Peterson Institute for International Economics in Washington, the "striking thing" about last year's report was that it painted a rosy view of the trade imbalance by focusing on the capital account surplus, rather than its inverse, the current account deficit.
The States is due to decide in February if it will approve funding for the project from the capital reserve account, with the funding recovered through increases in harbour charges.
The depth of America's financial markets and the country's open capital account have made the dollar attractive.
More than 70% of all rail journeys now begin or end in the capital and they account for more than half of all passenger revenues.
In addition, the shrinking balance sheet of GE Capital on account of the sale of its commercial real estate holdings is expected to impact its results.
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No deduction shall be allowed for amounts paid or accrued for such taxes and carrying charges as, under regulations prescribed by the Secretary, are chargeable to capital account with respect to property, if the taxpayer elects, in accordance with such regulations, to treat such taxes or charges as so chargeable.
In the early 1990s, the Asian miracle economies received a large inflow of foreign private capital on account of the financial liberalization they undertook and their economic success.
Arvind Subramanian, an economist at the Peterson Institute for International Economics, a think-tank in Washington, DC, argues that the recession in eastern Europe sounds the death knell for one of the two main growth strategies of the past 20 years capital-account liberalisation (growth through exports is the other).
Thanks to the dollar's stability, liquidity and low transaction costs, the U.S. has an edge in attracting capital inflows to finance the current account deficit.
The US also has a big deficit on its capital account, which has made it the world's largest debtor nation.
The necessary counterpart to an inflow of foreign capital is a deficit in the current account the largest component of which is trade in goods and services.
The delicate process of freeing up China's capital and current account restrictions to allow the yuan to play a role commensurate with China's industrial power will take time.
India also needs to keep rates high enough to attract foreign capital and offset the current account deficit, in order to keep the rupee from weakening and making inflation worse.
Broadly, though, all banks earn money through some combination of maturity transformation (borrowing short and lending long), taking credit risk (ie, lending to people who may not pay it back) and earning fees and punting on their own account in the capital markets.
Nonetheless, the most likely scenario remains that the Dilma government, reaching new highs in popularity despite a slowing economy, will use its ample political capital to change the savings account rule before the May meeting and so allow for a larger rate cut of 50.
With a 1.35% annual yield, Sallie Mae is looking to pick the pockets of established online-account players like Capital One and Ally Bank (the new business name of GMAC), which respectively offer yields as high as 1.45% and 1.39%.
Later that month a representative indicated that the capital gains distribution credited to her account was a computer error.
The current account deficit basically reflects capital imports and exports, or, to put it a slightly different way, the difference between domestic savings and domestic investment.
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India also needs to keep rates high enough to attract foreign capital and offset the current-account deficit, in order to keep the rupee from weakening and making inflation worse.
These would eventually rise further, perhaps a lot further, were the country to open up its capital account without first having a political and economic system with more transparency, less corruption, and some notion of sound lending practices.
ECONOMIST: Will China float the yuan, revalue it up a bit, or neither?
Ms. HUELLE: Well, my credit line has been reduced, which is my safety net, which means now I have to be conservative going forward into the holiday season with my spending, because I now have to keep the safety net in my liquid capital account, whereas before, I could've, you know, spent a little more, got more objects in, but now I have to keep that in my account.
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