Research On The Currency Anchor Effect Of The Renminbi In The Construction Of The "Belt And Road"

The structural defects of the current international monetary system are the root cause of frequent global economic crises.Therefore,the international community has advocated to promote the reform of the current international monetary system,which is dominated by the US dollar,to promote the diversified development of the international currencies.It has created conditions for the development of the Renminbi(RMB).In the 21 st century,with the rapid development of the Chinese economy,the improvement of the level of opening up,and the continuous improvement of the flexibility of the RMB exchange rate,the RMB has gradually played an important role in the world economy and the international monetary system.Since China promoted the RMB internationalization in 2009,the rise of the RMB has been very eyecatching.However,the internationalization of the RMB is by no means a day’s work,it needs to go through a long and gradual process.The essence of the currency anchor is the exchange rate coordination mechanism under the framework of currency cooperation.When one currency develops into an international currency,it usually becomes a reference standard for the exchange rate of other currencies around the world.Therefore,promoting the RMB to exert currency anchor effect in a wider area can create a good condition for the deepening of regional currency cooperation in the future.It is an important step for China to prudently promote the internationalization of the RMB.The "Belt and Road"(B&R)Initiative proposed by China,as an important initiative to shape a comprehensive opening-up pattern,has gradually developed into a global consensus since it was proposed in 2013.The geographical scope covered by the B&R is centered on the Eurasian continent,and has been further extended to Oceania,Africa,and the Americas.The number of the partners of the B&R continues to increase.Since the new pattern of international cooperation created by the B&R Initiative is of great significance to the development of the RMB,it is regarded as an important platform for promoting the internationalization of the RMB.In this context,by taking the RMB anchor effect as an entry point,this article aims to explore the path for China to prudently promote the RMB internationalization from the perspective of the B&R construction.It can not only expand the breadth and depth of research on RMB internationalization,but also provide certain enlightenment for China to grasp key directions in the construction of the B&R to enhance the status of the RMB as a currency anchor,promote regional currency cooperation,and accelerate the process of RMB internationalization.This paper has realized a certain marginal innovation on the basis of existing research.First,the innovation of the research perspective.Following the logic of "enhancing the status of being a currency anchor,deepening regional currency cooperation,and accelerating the process of RMB internationalization",taking the construction of the B&R as the perspective,using the currency anchor effect of the RMB as an entering point,this paper conducts an in-depth theoretical and empirical research to made up for the insufficiency of deep-level research on RMB internationalization.Second,the expansion of the research scope.This paper expands the research sample from East Asia or Asia to the B&R countries,making the research scope more comprehensive,and at the same time,it can help to have a more comprehensive grasp of the spatial distribution characteristics.Third,the breakthrough of the research methods.In the empirical research in Chapter 4,Chapter 5,and Chapter 6,this paper optimizes and improves the research methods to make the research results more robust and effective.Following the thread of thought of "the starting point of the research,the basis of the research,the core of the research,the end point of the research",this paper consists eight chapters.From the perspective of the starting point of the research,Chapter 1 focuses on the background and significance of the research.Based on the core theme,this paper raises four key questions.That is,is it the time for RMB to develop into a currency anchor? Has the RMB exerted currency anchor effect in the B&R countries? How to further enhance the status of the RMB being a currency anchor? And does China have the conditions to use the RMB as the currency anchor to promote the regional cooperation with the B&R countries?From the perspective of the basis of the research,Chapter 2 sorts out related theories,including the theory of Optimal Currency Area,Currency Substitution and Choice of Invoicing Currency,to provide theoretical support for the subsequent research.At the same time,it summarizes and reviews relevant domestic and foreign research,to better grasp the research trends.In addition,it can also help to discover the limitations of existing research to clarify the directions for expansion in this paper.From the perspective of the core of the research,Chapter 3,Chapter 4,Chapter 5,and Chapter 6 respectively answer and analyze the four core questions raised in Chapter 1.First,the background of the RMB becoming a currency anchor is studied.On the one hand,this chapter summarizes the evolution of currency anchors.It is found that currency anchors have changed with the changes of the international monetary system,and the currency anchors in each period are supported by the strong economic strength and solid trade foundation of the currency issuing country.Under the Jamaican system,although the U.S.dollar is still the dominant currency anchor around the world,the choice of currency anchors has shown a diversified trend.This has created conditions for China to actively promote the RMB anchor effect in the international monetary system.On the other hand,the internal foundation,external opportunities,and restrictive factors of RMB becoming a currency anchor is judged.It turns out that although opportunities and challenges coexist,the prospect of RMB becoming a currency anchor remains clear.On the basis of increasing economic strength,deepening the degree of opening up,increasing the flexibility of the exchange rate system,and achieving more breakthroughs in the RMB internationalization,China should seize the opportunity to promote the reform of the international monetary system with a more positive attitude,develop a new type of economic globalization with a more optimistic view,and build a B&R community with a shared future with a more cooperative way.At the same time,by actively broadening the two-way circulation channels of RMB,improving the construction of the financial system,and promoting the RMB to be the denominated currency for commodities such as oil,China can break the restrictions of the incomplete opening of the capital account,eliminate internal shortcomings,and break through the external constraints of dollar hegemony.Secondly,to grasp the status quo of the RMB more intuitively as an implicit currency anchor in the B&R countries,this paper set an improved external currency anchor model to measure the RMB anchor effect and compare with the four major international currencies,the US dollar,the euro,the yen,and the British pound.The results show that from the overall trend of change,the status of the RMB as a currency anchor in the B&R countries has been significantly improved.At the same time,the status of the dollar as the dominant currency anchor has always been very stable,but as for the euro,the status has been significantly weakened.In the third stage,the status of the RMB being a currency anchor has surpassed that of the euro,although it is still less than the US dollar.For the sample countries,the radiation ranges of the US dollar and RMB are significantly higher than the other three currencies,while the euro shows more of the nature as a regional currency.From the perspective of spatial distribution,although the currency anchor effect of the RMB in some countries is still weak,its influence has covered five continents and there is no vacuum area.With the rise of the RMB,the external anchor in the international monetary system is moving from the "two-pole system" of the US dollar and the euro to the tri-polarization of the US dollar,RMB and the euro.The choice of currency anchors worldwide is characterized by diversification and regional heterogeneity.Thirdly,since the RMB anchor effect in the B&R shows obvious regional heterogeneity,this paper uses a combination of theoretical analysis and empirical testing to examines the factors that may affect the currency anchor effect of the RMB in the B&R countries.Through the analysis of the impact mechanism,the government cooperation,trade,investment,and finance have important impact on the RMB anchor effect in the B&R construction.To verify the empirical research hypothesis proposed by the theoretical analysis,this paper constructs an influencing factor model and uses the panel ordered Logit model to test.Through the basic and further analysis,the results show that at the aspect of goverment cooperation,the closer a country’s policy cooperation with China is,the more likely it chooses the RMB as its currency anchor.As for the aspect of the trade,the degree of trade dependence has a significant positive impact on the RMB anchor effect,but the impact mainly comes from the import trade of the sample countries from China.At the aspect of the investment,the two-way investment dependence has a positive effect on promoting the RMB anchor effect,indicating that the establishment of a benign RMB "outflow-inflow" mechanism is of great significance to enhancing the status of RMB being a currency anchor in the B&R countries.At the aspect of the finance,currently,China’s expansion of opening up to the B&R countries in the financial market has limited influence on increasing the possibility of the RMB being its currency anchor.However,the construction of the RMB infrastructure of internationalization is an important guarantee for improving the status of the RMB.Finally,this paper further analyzes the feasibility that China dominates regional currency cooperation with the RMB being the anchor.According to the gradual path to promote regional currency cooperation that is "economic integration,financial cooperation,and finally currency cooperation",this paper first analyzes the status quo of economic cooperation between China and the B&R countries,and then the progress of financial cooperation.The results show that the economic cooperation between China and the B&R countries are in a good situation.As China is also committed to seeking new breakthroughs,they have huge potential for future cooperation.In addition,the sound development momentum of trade and investment has spawned the demand for the development of financial support.Hence,China and the B&R countries have carried out a series of beneficial explorations in financial cooperation,which created conditions for the promotion of in-depth regional currency cooperation.Considering that ASEAN has the most solid trade and investment fundamental support,it is the priority direction and breakthrough point for China to develop regional currency cooperation.Therefore,based on the theory of optimal currency area,this paper uses the OCA index method to empirically test the potential of China and ASEAN to develop regional currency cooperation under the background of the B&R initiative.The conclusion shows that the feasibility to develop regional currency cooperation between of China and ASEAN has gradually improved,and China has the potential to dominate regional currency cooperation.Currently,the top two countries which are suitable for regional currency cooperation with China are Singapore and Malaysia,while Myanmar and Brunei are the countries with the least potential.From the perspective of the end point of the research,on the basis of the above analysis,Chapter 7 puts forward the policy recommendations to propose a path for the RMB internationalization with Chinese characteristics,which can help to balance national conditions and international standards and coordinate the development of benefits and risk prevention.To promote the stable and sustainable development of the RMB internationalization,the following path should be followed: In terms of policy,relying on the strategic coordination of the highquality development of the B&R and the prudent promotion of the RMB internationalization".In accordance with the time path of “short-term,mid-term and long-term”,completing the spatial expansion as "ASEAN,the other B&R countries,and the world”,realizing the hierarchical advancement as "exploration,strengthening,and breakthrough",and achieve the goal as "improving the status of the RMB being a currency anchor,deepening regional currency cooperation,accelerating the process of the RMB internationalization.Specifically,on the one hand,China can create a good external environment for the RMB through government cooperation,cultivate real demand for the RMB through trade and investment channels,and promote a virtuous cycle of the RMB through financial channels,to enhance the status of the RMB being a currency anchor in the B&R countries.On the other hand,China should first deepen currency cooperation with the regions,which have a good foundation of cooperation,such as ASEAN.At the same time,following the gradual development path which gives priority to the economic cooperation,China should promote a solid foundation for economic cooperation in other regions according to the factor endowments and the status quo of cooperation.Finally,Chapter 8 summarizes the full text and makes future research prospects.