Inside looking out: how international policy trends shape the politics of capital controls in China

Abstract

This paper examines the political-economy of capital controls in China. We argue that the global policy context influences domestic political debates over capital controls, which, in turn, can shape public attitudes toward the subject. Policy entrepreneurs on each side of the capital controls debate can point to capital account policies in other countries as evidence for the desirability of their position. This issue framing strategy, in turn, influences domestic preferences on capital controls. We present qualitative evidence showing that the international policy context features heavily in domestic political debates about capital controls in China. Next, using original survey data, we show that information about other countries’ policy choices influences mass public attitudes about capital controls in China. The evidence indicates that growing global use of capital controls can strengthen public support for this policy. More broadly, these findings suggest that a complete understanding of policy diffusion requires greater attention to the role played by domestic policy entrepreneurs.