Capital Account
The component of a country's balance of payments that records cross-border transfers of financial assets and capital.
What is Capital Account?
In the balance of payments framework, the capital account records international transfers of financial assets and claims. In the IMF's narrower modern definition, the capital account captures non-market capital transfers such as debt forgiveness, migrants' transfer of assets when moving between countries, and fixed asset transfers between governments. In earlier and still-common usage, 'capital account' refers broadly to what is now called the financial account: the net change in a country's foreign assets and foreign liabilities, including foreign direct investment (FDI), portfolio investment in stocks and bonds, other investment flows such as bank loans, and central bank reserve changes. The capital and financial accounts together must offset the current account in the balance of payments identity, since every cross-border transaction has a corresponding financial flow.
Example
China maintains strict capital account controls that limit the free flow of portfolio investment across its borders, requiring government approval for large capital inflows and outflows. These controls have allowed China to maintain a managed exchange rate for the renminbi and insulate its financial system from external shocks—but at the cost of slower integration into global capital markets. The IMF has long encouraged China to liberalize its capital account as part of efforts to internationalize the renminbi.