Shanghai correspondent Gabriel Wildau said China is making a move to increase the capital controls to lead the flood of cash out from Canada. This report from Financial Times indicates that other countries might eventually follow this move. It would then reduce the amount of cash even in the developed countries.
The free flow of money was supposed to boost the Canadian economy, however, China's action might have put it to a halt.
This control was also present during the Asian Crisis in 1990 wherein Malaysia demonstrated the control. Around 1995-2010, 37 countries were able to block the flow of money from their country to the other regions.
Recently, Iceland has lifted its six year control after the banking crisis that they faced. Similarly, Cyprus halted cash outflows during the 2013 banking meltdown while Ukraine did so when they had a conflict with Russia. Argentina and Valenzuela.
Up until now, the different governments are still adamant about financial bankers, fearing that another "Great Depression" will occur. The outflow by then needed the approval of finance ministry officers. Since the Second World War had unstable economies, capital controls became the main rule rather than an exception.
In order to stabilize, the fixed exchange rates between countries were followed. This implemented rule looks as if cash outflow from one country means another country robs them off their wealth.
Moreover, the 1970 currency controls became ironically uncontrollable. Money became an asset that moves across the borders.
With the new free paradigm, the free circulation of money across different countries is seen to be a good thing instead.The freely exchangeable currencies can aid the countries in international economic alignment. This has become the reason why countries chose to have exchange rates that are flexible.
According to Ye Xie, a Bloomberg backgrounder, the cash control is useful because "it puts capital where it's most useful, maximizing prosperity." Saying this, the Canadian real estate flow will gain from it positively.
