Itami international airport. (Credit: motive56/Bigstock)
Itami international airport. (Credit: motive56/Bigstock) (via:

With the exception of only two years – 2006-07, when oil prices were at their highest – capital has been flowing out from Russia since the early 1990s (Fig. 1). In order to finance this capital outflow, Russia has had to earn a current account surplus by exporting more than importing, producing more than consuming, and saving more than investing. This problem is known as ‘capital flowing uphill’, i.e., from poor to rich countries; whereas general economic logic suggests the opposite – as a rule, capital should flow from capital-abundant (developed) countries to capital-scarce (developing and transition) countries.

The usual explanations – poor investment climate; lack of liberalisation; corruption; slow growth; poor institutions; chaos and disorder within Russia – may be missing the point, because countries with a good investment climate and rapid growth also often have a current account surplus: China is the primary example. Even though there is an inflow of private capital into China, until recently the Chinese monetary authorities had been exporting capital in the form of an increase in foreign exchange reserves, so China was also saving more than investing, and producing more than consuming. Like Russia, China has had a current account surplus; unlike Russia, it has been a net importer of private capital rather than an exporter. What are the origins and implications of the similarities and differences between the Chinese and Russian models, in terms of capital flows and balance of payments?

The views and opinions expressed in this publication are those of the original author(s) and do not necessarily represent or reflect the views and opinions of the Dialogue of Civilizations Research Institute, its co-founders, or its staff members.

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Vladimir Popov

Research Director in Economics & Political sciences, DOC Research Institute, RU

Vladimir Popov is a Principal Researcher in the Central Economics and Mathematics Institute of the Russian Academy of Sciences. He is also a professor emeritus at the New Economic School in Moscow, and an adjunct research professor at the Institute of European and Russian Studies at Carleton University in Ottawa. In 2009-15 he worked in DESA, UN, as a Senior Economic Affairs Officer and Inter-regional Adviser. He has published extensively on world economy and development issues (he is the editor of three books, and author of ten books and hundreds of articles, including in the Journal of Comparative Economics, World Development, Comparative Economic Studies, Cambridge Journal of Economics, New Left Review, as well as essays in the media). His books and articles have been published in Chinese, English, French, German, Italian, Japanese, Korean, Norwegian, Portuguese, Russian, Spanish, and Turkish. His most recent book is “Mixed Fortunes: An Economic History of China, Russia, and the West” (Oxford University Press, 2014). He graduated from the Economics Department of the Moscow State University in 1976, and holds PhDs (Candidate of Science, 1980; and Doctor of Science, 1990) from the Institute for US and Canadian Studies of the Academy of Sciences of the USSR. More info can be found at his website: