Research On The RMB Invoicing And Settlement Of Cross-border Trade In ASEAN+3

Nowadays,as the risks of the world economy continue to rise and the negative effects of protectionism and unilateralism increase,the disputes between China and western developed countries which led by the United States,in international trade and investment have become increasingly serious.The price fluctuations of commodities in the international market have severely impacted the global industrial structure and financial stability.Unstable and uncertain factors in economic operation are on the rise.The United States unilaterally imposed tariffs and provoked trade disputes on China's economy,especially on the expected impact of enterprises unceasingly appears.As far as RMB internationalization is concerned,the crucial moment for the development of RMB internationalization is coming.How to combine the One Belt And One Road initiation with the Asia infrastructure investment bank construction and promote high-quality development of RMB internationalization;It is a key measure to counter the negative impact of external economy such as China-US trade friction on China's economic development.The entry point of this paper is to introduce relevant theories of currency internationalization within the framework of regional economic integration,and deeply study the issues related to RMB becoming cross-border trade invoicing and settlement currency in ASEAN+3 which has close economic and trade ties with China and mature cooperation mechanism.The main ideas of the research are: economic development promotes regional economic integration,which further promotes economic development,accelerates the flow of commodities,currencies,production factors and technologies within the region,breaks the traditional country boundaries,expands the market,and promotes the economic and trade exchanges among regional members.In the process,in order to improve the level of trade facilitation,reducing transaction costs to avoid exchange rate risk,countries around the region will be according to oneself circumstance,based on the principle of profit maximization,choose suitable denominated currency as a trade settlement currency,the currency used by more and more national,which has the significant influence in the area.By referring to the process that international currencies such as Dollar,Euro,Pound and Japanese yen become the main currency of trade invoicing and settlement,this paper studies the relevant issues of RMB becoming the currency of invoicing and settlement of cross-border trade in ASEAN+3,so as to provide targeted and feasible suggestions for the future development of RMB internationalization.Based on the research purpose and content,this paper focuses on three aspects:(1)Finding out the determinants of the selection of RMB as the cross-border trade invoicing and settlement currency in ASEAN+3.(2)Analyzing the necessary conditions for RMB to become a cross-border trade invoicing and settlement currency in ASEAN+3.(3)Study the impact of RMB as the invoicing and settlement currency of trade between China and the partners of ASEAN+3.This paper contributes to the existing literature in the following three aspects.Firstly,this article is aimed at the fact that China's current capital account has not been fully opened,and the RMB has not yet been fully convertible.In the short term,the RMB is so difficult to fulfil the all conditions of internationalization,however,which is imperative and inevitable for the RMB to go abroad.Because of all the “ASEAN+3” is chosen,which has close economic and trade ties with China,in order to research the determinants,necessary conditions and impact on trade between China and partner countries of RMB would be selected as the currency of invoicing and settlement in cross-border trade.Which can help the development of RMB internationalization,and provide the preliminary preparations of research for analyzing and discussing issues related to RMB internationalization in the larger regions such as RCEP or “The Belt and Road”.Secondly,due to the limitation of data for a long time,previous studies on the choice of RMB as the currency determinant and influencing factor of cross-border trade invoicing and settlement mainly focus on theoretical analysis and numerical simulation,lacking a systematic mathematical analysis framework that can be tested by empirical analysis.The innovation of this paper is to construct a model in which one country's currency is accepted by another country and becomes the currency of invoicing and settlement in the trade between two countries.By using the panel data of ASEAN+3,partner countries using RMB to settle accounts,eight theoretical hypotheses derived from the model are tested empirically,and the factors of the determinants for choicing RMB are obtained.Thirdly,this paper uses foreign research methods to analyze the trade creation effect of monetary union or common regional currency to countries in the region,and uses Armington model based on the CES utility function of tradeable goods consumers in the country of origin to analysis the theoretical problems.Then the methods of OLS and LSDV are used in gravity model which base on the different samples to analyze the effect of the trade between China and China's partners of ASEAN+3,,which RMB can be used to invoicing and settlement.According to the analysis,the basic conclusions are as follows:First,based on the developing path and experience of the main international trade denominated currency like Pound,US Dollar,Euro,Yen,etc.,the implication is that the RMB will not become a major,internationally recognized and dominant international currency overnight that can play partially or fully functions as the international currency has its inertia in a certain period under the impact of the external network.We shall promote the internationalization of RMB gradually from easy to difficult.Regardless of the specific and incomparable historical positions of pound and US dollar,the invoicing and settlement status of US dollar in commodity trade of resource products and raw materials is worth learning,following,and fighting for.Germany has strong economic strength and international trade basis.The experience of high quality trade goods,low inflation rate and stable value of the Deutsche Mark is also worth learning.We also shall learn a lesson from Japan that with the low degree of differentiation of export products,Japan is highly dependent on the American market so the opening of the capital account has caused the unbalanced development of the invoicing and settlement system and the international reserve function of the Yen,which finally led to its overvaluation and the bubble economy.In terms of the current development of RMB settlement of cross-border trade in China,the trade type is still dominated by trade in goods.The business is concentrated in Shanghai,Guangdong,and Beijing.The region with the highest share of Yuan settlement is mainly in Asia,especially in East Asia and Southeast Asia.Hong Kong has the highest share and followed by ASEAN+3.Therefore,we shall focus in the ASEAN+3 in promoting cross-border trade RMB invoicing and settlement.Only clear research emphasis can be targeted.Thus,the valid conclusion in theoretical and practical purpose can be obtained at the last.Second,due to the further assessed and cleared study range of this article of ASEAN+3,eight theoretical assumptions about the determinants of currency selection for cross-border trade invoicing and settlement are derived by means of setting up the selection model of cross-border trade invoicing and settlement currency,and the panel data are used to test it empirically.The conclusion is that within the ASEAN+3,the key factors determining the choice of RMB as the invoicing and settlement currency are economic scale of a country,bargaining power between China and partner countries,domestic market conditions in partner countries,inflation rate and its fluctuation degree in partner countries,the currency trading cost between China and its partners,the linkage between partner currencies and RMB as well as the heterogeneity of goods traded between China and its partners.However,the existing models can't determine the impact of the development of financial markets and their openness on the choice of RMB settlement among the partners in ASEAN+3,which is also the research Points in the future.Third,based on the conclusion mentioned above and horizontal and vertical comparison with other major cross-border trade invoicing and settlement currencies as well as currencies of various countries in the region,we find out that China's economic scale has laid a solid foundation for the RMB to become a currency of trade settlement ASEAN+3.From the perspective of international trade,China's foreign trade structure is still large but not excellent.From international financial aspect,China has no significant competitive advantage in its exchange rate flexibility,financial market openness and trade capital control degree,and inflation,monetary transaction costs and exchange rate volatility,compared with regional partners or denominated international trade settlement currency issuing countries,and even in some areas development still lags behind.From the perspective of currency risk,RMB exchange rate has certain uncertainty and complexity,and the competitiveness of risk management and control of currency circulation and transactions is still weaker than other major trade invoicing and settlement currencies.In terms of the influence on the currencies of countries in the region,the US dollar is still the most influential currency,and the Euro and the pound also have some influence on certain countries.In recent years,the influence of the RMB has been increased,while that of the Yen has been decreased.Fourth,after analyzing the determinants and the conditions needed,the analysis samples were divided into three different types for classification and summarization by measuring MSAD and PSAD.Based on the four theoretical assumptions derived from the Armington model under CES utility function of tradable goods consumers in the original country and the trade status stimulation between the two countries,three different types of samples were analyzed,using the gravity model and OLS method and LSDV method.The conclusion is that in the bilateral trade between China and the partners of ASEAN+3,the use of RMB as the common invoicing and settlement currency will increase the bilateral trade volume by nearly 35% in terms of the overall sample,in which the increase is about 40% for samples of MSAD>1 and the effect on bilateral trade was not statistically significant for the sample of PSAD>1.This conclusion also verifies that in the conditional analysis,although RMB as the currency of cross-border trade invoicing and settlement has significant advantages in some areas,there is still a big gap in some areas compared with the US Dollar,Euro,Pound and other invoicing and settlement currencies.Also,there are still problems like lagging development of relevant supporting facilities,which is also the direction of the development of the RMB internationalization.