The Action Plan recognized that financial deepening in general, and LCBM development in particular, could enhance the stability of the international monetary system by (i) raising capacity of economies to absorb volatile capital flows and intermediate them efficiently and safely; (ii) reducing reliance on foreign savings; (iii) attenuating external imbalances; (iv) mitigating the need for large precautionary reserve holdings; and (v) improving the capacity of macroeconomic policies to respond to shocks by allowing balance sheets to adjust more smoothly.
A recent guest post by Jingdong Hua of the International Finance Corporation notes that capital markets have been a driver of China’s economy, which has displayed remarkable growth of roughly 10 per cent over the past three decades.