Why Are Capital Controls Destructive?

QUESTION: Controls v Protectionism

If capital controls would be such destructive measure, then China already has in place what one would consider Capital Controls and if they were to lift their control a lot of money will leave China – why is that not destructive: as you mention that the centre of finance will move east to China.


ANSWER: Sorry, I suppose I was not detailed enough. Capital controls are destructive when they are imposed to prevent foreign capital from leaving. They are a red flag that warns nobody else will invest. In the case of China and Russia, when that airtight policy was imposed upon their own people, then it retarded economic growth.

The bulk of Bitcoin traffic was used to get capital out of China. We see a lot of Chinese buyers around the world, even in real estate.

China is trying to gradually move toward an open market. When capital is free to flow in and out, then China will be ready to displace the USA as the financial capital of the world. Had the United States imposed capital controls after the war, then both China and Europe would still be in an economic dark age.