Fixed Exchange Rate Regime vs. Capital Control

Usual belief that the fixed exchange rate regime brings with stability is a misconception. Almost all speculative attacks are targeted on currencies with fixed exchange rate regime, and in fact, the stability of the economy system is mainly due to Capital control. The fixed exchange rate regime should be viewed as a tool to ensure the capital mobility control. For instance, China allows freely exchange for current account transactions since December 1, 1996. In more than 40 categories of capital account, there are about 20 of them are under control. Because of the capital control, even renminbi is not under the managed floating exchange rate regime (but a clean floating), it will be useless for foreigners to get renminbi. So it is not about the exchange rate regime that matters for the dynamics of balance of payment, but the capital control.