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The countries run trade surpluses and also attract large capital flows.
"Large capital flows into emerging economies have enabled credit levels in these countries to rise sharply," it states.
And China still links its currency to the dollar, limits its convertibility into other currencies and imposes restrictions on large capital flows -- all steps that insulate it from the global economy.
"The Chinese are deliberate; there will clearly be large capital flows coming to the West," said Stephen A. Schwarzman, chief executive of the Blackstone Group, the largest private landlord in the United States.
The deficit reflects, among other things, large capital flows from abroad, which sustain the dollar as a reserve currency; the deficit has remained roughly unchanged at about two to three per cent of G.D.P. over the past seven years.
After the creation of the euro, investors developed a false sense of security about lending to peripheral economies; this led to large capital flows from the core to the periphery, and corresponding current account imbalances: These capital inflows also caused a boom in the periphery that raised costs and prices dramatically compared with the core: Now all of that has to be unwound.
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In sum, Spain thus was the recipient of large capital inflows, flows that got reversed when the banking crisis worsened.
But once again, as they trial the reform in the FTZ, they'll need a strong firewall, in an attempt to limit the danger of sudden, large-scale capital flows.
It could also induce large fluctuations in capital flows and exchange rates," the IMF warned.
Large and volatile capital flows mean that floating currencies can be a source of instability.
And although the withdrawal of foreign capital was less aggressive than initially feared, it is clear that the large pre-crisis capital flows to the region were unsustainable and destabilizing.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com