The road to capital account liberalization : how emerging markets defend their interests in the global financial order

• Main Author: Huang, Yutao
• Format: Dissertation
• Language: English
• Published: University of Oxford 2021

As free capital mobility is an essential characteristic of the global financial order, whether emerging markets liberalize their capital account is a topic that has aroused wide discussion. Even though many scholars propose the general trend to liberalization because the international system constrains state behavior, some emphasize that emerging markets would make resistance because of their discontent toward volatile capital mobility. However, neither could fully explain two interesting phenomena: first, when the financial order's coercion culminated, some countries could independently maintain restrained liberalization. Second, after the order has confronted a legitimacy crisis, China unexpectedly accelerated the liberalization even if it has long maintained the restriction. The primary aim of this project is to explain emerging markets' uneven capital account liberalization process before the subprime crisis and China's accelerated liberalization after the crisis. To achieve this, I take advantage of the new liberalism international relations theory to develop my novel arguments. The empirical studies involve a quantitative analysis that examines emerging markets' diverse liberalization scope within two decades, complemented by investigating the implementations of capital mobility restrictions in three typical cases, and a case study that focuses on China's unexpected behavior. The key finding is that strong governance capacity helps emerging markets make the customized policies that are perceived as the 'right' to the national economy, leading to restrained liberalization. Secondly, trade globalization brings overlapped interests, motivating countries to further open the financial market. Especially when international financial institutions need support most, sending positive signals can obtain more rewards in return. The significance of this study is that it unveils emerging markets' capacity to defend their interests and the willingness to make a reconciliation. It also suggests that we should not overestimate the tension and conflict brought by emerging markets on the global financial order.