Capital Control in China

: Capital controls were useful during the financial crisis but long term capital control is detrimental to China’s economic growth. Although China has reformed its capital control policies, (World Bank, 2012) more should be reformed in order for China to grow to the next level of economic success. The economic theory posits that capital controls like tariffs on goods are negative to economic efficiency because they prevent productive resources from being used where they are most needed. This paper investigates the history of capital control and discusses the costs and benefits for China to abolish or reform its capital control policy.