Nevertheless, a large deficit does mean that an economy and its currency may struggle if foreign-capital inflows suddenly dry up.
Brazil has also tried to limit an influx of foreign capital, which has forced the real currency to new highs, making the country's manufacturers less competitive.
Another measure: Asia's central banks are again scooping up capital inflows and putting them into foreign-currency reserves.
WSJ: Asian Governments Take Measures to Battle Strong Currencies
Therefore, to jump start the economy, the government had to rely on foreign direct investment and exports to bring capital and hard currency into the country, and as the economy developed, it had to use government spending to build infrastructure and further fuel growth.
Since they will be in a foreign currency, the issue will not be affected by Malaysia's capital controls.
Rieschel reasons that the Chinese currency fund is necessary because certain deals are difficult for foreign capital to invest in.
If, as a result of capital inflows, there is an excess supply of foreign currency, the central bank must buy it and sell yuan to keep the exchange rate stable.
That would have one beneficial effect, by discouraging the inflows of short-term foreign capital that have pushed up the value of Brazil's currency, the real, thereby making Brazil's exports less competitive.
Two kinds of capital stand out: short-term debt, and debt denominated in foreign currency.
It was also to blame for the recession that hit the country when foreign capital flowed out in 1995 for fear of an Argentine version of Mexico's currency crash.
Moreover, Malaysia's sweeping new capital controls will impede trade, because they make it harder for importers to get hold of foreign currency.
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