Measuring on-going changes in China's capital controls: A de jure and a hybrid index data set

- Motivated by the importance of China's capital controls to the Chinese economy and the lacking of proper measurement for China's capital controls, we create a data set that measure the change of China's capital controls from 1999 to 2012.
- We translate the changes of China's capital control policies to numerical values that reveal a persistent but uneven process of China's capital account liberalization.
- Compared to other capital control measurements, usually in yes-or-no dummy style, our measurements are more advanced and properly capture the evolution of China's capital control policies.

Liberalizing China's capital account controls may have profound implications for the RMB exchange rate, monetary policy autonomy, and Chinese economy. However, rigorous studies on the importance of China's capital controls are limited, primarily due to the scarcity of proper measurements of China's capital controls. In this paper we create a new data set of indices including de jure and hybrid measurements of the changes in China's capital controls. In contrast to other capital control indices that are compiled in a yes-or-no style, we quantify the intensity of changes in China's capital controls. Our indices reveal a persistent but uneven process of capital account liberalization in China between 1999 and 2012. This paper describes the de jure and hybrid indices, including indices for capital controls on individual asset categories, gross flows, inflows and outflows, as well as for resident and nonresident asset transactions. Understanding that China usually implements policies in a step by step gradualist style, we extract this gradual information from the text in the IMF's Annual Report on Exchange Arrangement and Exchange Restrictions (AREAER) and some supplementary material from other sources.