The Research On The Issue Of RMB Internationalization

The subprime mortgage crisis in the United States has made the problems ofinternational financial system increasingly evident and exposed the inherent defects ofUSD-based international monetary system. The world has been full aware that thediversified international monetary system can cushion the impacts of internationalfinancial crisis upon the real economy, which urges countries to seek other internationalcurrency or even regional currency so as to mitigate potential loss from depreciation ofUS dollar.In response to the impact of financial crisis on the real economy, the United Statescarried out two rounds of quantitative easing monetary policy. Although theimplementation of these policies revived America economy to a certain extent, itaggravated the devaluation of US dollar and inflation. Moreover, the United States, as asuperpower, didn’t take into account of possible impacts upon other countries as a resultof its monetary policies. In this regard, these policies will inevitably undermine USdollar’s status as leading international currency as well as the status and prestige of theUnited States in the international community. In the meantime, more market-orientedeconomy and deepened globalization have provided China with rapid economic growthcombined with improved international influence and international competitiveness,which has laid a solid economic foundation for RMB to become an internationalizedcurrency. Confronted with the financial crisis, China, positioning itself as a power,protected RMB from depreciation and strived to maintain RMB currency value, whichimprove the international reputation of RMB to a large extent. In this way, RMB hasbeen applied as a transaction currency in trade settlement and financial investment in theworld. Also, the Chinese government has made great efforts to accelerate theinternationalization of RMB.This paper contains seven chapters. Chapter1is the introduction, including researchbackground and significance, international currency theoretical definition, literaturereview of domestic and foreign studies, research ideas and methods, paper organization,main content, innovations and deficiencies. Chapter2focuses on the development of, including a theoretical summary of currency internationalization idea evolution. Chapter3analyzes RMB internationalization and supporting factors in the international monetarysystem. Chapter4makes an empirical analysis on RMB internationalization and China’smacro economy from eight perspectives of exchange rate, capital account openness,financial market, monetary policy, seigniorage revenue, policy credibility, internationalbalance of payment as well as banking business. Chapter5discusses risk assessment andcontrol of RMB internationalization, including theoretical demonstration and empiricalverification of potential risks of RMB internationalization, so as to put forward riskprevention measures. Chapter6is strategic choice for RMB internationalization from theviewpoint of economic environment, policies and measures as well as internationalcooperation. Chapter7concludes the paper.This paper follows “problem-analysis-solution” pattern and carries out theoreticalresearch and empirical analysis on problems of RMB internationalization. Based onmacro and micro economic theories and monetary theories, this paper makes theoreticalarguments on RMB internationalization, together with empirical research on therelationship between RMB internationalization and macro economy in China based ontime series analysis as well as risk assessment and prevention.This paper has reached the following conclusions. First, the enhanced economicstrength and international status, stable RMB value and favorable international prestigehave laid the economic and reputation basis for RMB internationalization. Second, givento the relationship between RMB internationalization and macro economy, exchange ratestability, policy credibility, capital account openness and the effectiveness of monetarypolicy will all influence RMB internationalization progress. Therefore, the promotion ofRMB internationalization must give priority to correct handing of the relationshipbetween RMB internationalization and macro economy. Finally,RMB internationalizationwill expose China to various financial risks. For this reason, in the process of RMBinternationalization, China is supposed to make effective risk assessment and preventionto cushion the impacts on China’s real economy and financial market.All in all, in order to accelerate the internationalization of RMB, there shall be asolid economic foundation and agreeable external environment in the first place.Moreover, it is necessary to keep exchange rate stable, maintain RMB value and international status, gradually achieve capital account opening and RMB freedom andexchange, increase the RMB proportion in trade settlement, financial investment andforeign exchange reserves, improve domestic financial and realize market-orientedinterest rate. Last but not the least, with profits from RMB internationalization, it is alsoimportant to strengthen risk assessment and prevention of RMB internationalization,reduce the cost of RMB internationalization as well as maximize the profits.