creator Liu, Zheng 20669 creator Spiegel, Mark M. 5501 creator Zhang, Jingyi 20953 <p>China maintains tight controls over its capital account. Its current policy regime also features financial repression, under which banks are required to extend funds to state-owned enterprises (SOEs) at favorable terms, despite their lower productivity than private firms on average. We incorporate these features into a general equilibrium model. Our model illustrates a tradeoff between aggregate productivity and inter-temporal allocative efficiency from capital account liberalization under financial repression. As a result, along a transition path with a declining SOE share, welfare-maximizing policy calls for rapid removal of financial repression, but gradual liberalization of the capital account.</p> Working Paper 2018-10 10.24148/wp2018-10 multipart 2020-05-27 May 27, 2020 639804 2026-02-10 09:29:50 2023-07-19 13:32:13 item pb2018-10 7039 7038 creator Federal Reserve Bank of San Francisco 522 F38 G18 O41 text

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