Research On Influencing Factors Of RMB Settlement In Cross-border Trade

In the international monetary system of "one super with multiple others",consolidating and enhancing the international monetary function and position of RMB is an important link in breaking through the dual circulation blockages at home and abroad.It is also an important path to break away from the "US dollar dependence" in international trade and enhance China’s discourse in the international trade and capital markets.Among them,strengthening the position of the RMB as a cross-border trade settlement currency is the foundation for further realizing the "Chinese discourse power" in the international trade market and completing the "key leap" of the RMB’s function from pricing and settlement to becoming an international reserve currency.In view of this,this article selects three analytical dimensions: micro,meso,and macro,focusing on the impact of factors such as trade entity selection,market environment impact,and economic cooperation policies between countries on RMB cross-border trade settlement.This article helps to reveal the internal determining mechanism of cross-border trade settlement in RMB,combined with the gradual promotion strategy of China’s RMB internationalization construction,accelerate the construction of institutional design and policy system to promote the process of RMB internationalization,and provide theoretical basis and application inspiration for logical legitimacy and effect judgment.Firstly,this article analyzes the impact of factors such as trade preferences and currency selection characteristics on the RMB becoming a cross-border trade settlement currency from a micro perspective.Based on the analysis results of the bilateral trade welfare equilibrium model,this article finds that the trade dependence determined by market size determines the choice of settlement currency for traders,and traders who occupy a bargaining advantage tend to use their own currency for settlement.When trade products lack scarcity attributes,do not have a monopoly position,or face uncertain risks,in order to adapt to the constantly changing import market demand,the trade chamber adjusts the pricing currency selection based on the principle of profit maximization,and tends to use the currency of the importing country for pricing and settlement.In addition,currency stability is a key factor for traders to choose a settlement currency,and traders prefer to choose the currency with a lower inflation rate for pricing and settlement.Secondly,this article demonstrates the impact of market environment factors such as trade structure and exchange rate system on the RMB becoming a cross-border trade settlement currency.In a panel analysis framework,this article analyzes the effects of different market environmental factors on RMB cross-border trade settlement.The empirical results indicate that in bilateral trade,the influence of the trade market can promote the increase of RMB settlement share in cross-border trade,and the stock differences in the trade market have a positive impact on the RMB international cross-border trade settlement share.This proves the viewpoint that’small countries have no strong currency’.At the same time,the exchange rate system differences between trading countries have a negative impact on the share of RMB settlement.A similar exchange rate system puts trading countries in similar or even identical currency management channels,which helps to stabilize bilateral currency exchange levels and enable traders to complete transactions in a stable and predictable price system.At the same time,it also helps to further enhance the possibility of international pricing and settlement of the RMB under strong currency management.Through heterogeneity analysis,this article found that the sample group of trading countries that signed currency swap agreements,established offshore finance,and dual non policies(non currency swap and no offshore finance)did indeed exhibit typical heterogeneity characteristics.Later,it was also demonstrated that in the dual non sample group,trade influence had the greatest impact on RMB settlement,while in the group that signed currency swap agreements,trade influence did not show a significant impact.This result indicates that currency swap agreements,as a framework and mandatory trade facilitation policy,can effectively accelerate the integration of markets between trading countries,meanwhile the agreements facilitate the establishment of an equal,inclusive,and open trade environment.Therefore,the trade premium capability attached to trade influence no longer directly affects the choice of settlement currency.Currency selection,especially the holding and use of RMB,often becomes a spontaneous decision-making result based on utility considerations by micro entities.Once again,this article analyzes the impact of macroeconomic policies such as economic cooperation between countries on the RMB becoming a cross-border trade settlement currency during the implementation of the RMB internationalization strategy from a macro perspective,identifies the impact of the implementation of the "currency swap" policy on the settlement ratio of the RMB in specific trading countries’ bilateral trade through a double difference model.The empirical research results indicate that the signing of currency swap agreements between China and trading countries has significantly increased the share of RMB valuation and settlement in bilateral trade,especially in bulk trade,and has become an important policy driver for improving the level of RMB international trade settlement.This policy effect is achieved by establishing a more stable currency system,relatively open capital accounts among trading countries,and risk mitigation held by traders.This paper uses the double difference model to identify the impact of the implementation of the "the Belt and Road" initiative on the proportion of RMB cross-border settlement in bilateral trade between China and specific trade sample countries.Promoting the "the Belt and Road" initiative not only plays an important role in enhancing economic,cultural and political exchanges between China and countries along the Belt and Road,but also further enhances the international influence of the RMB by deepening cooperation and expanding trade scale,making the RMB move towards the goal of becoming an international settlement currency.More importantly,the implementation of the "the Belt and Road" initiative can effectively curb the dependence of trading countries on traditional international currencies and their negative impact on RMB settlement.This article examines the impact of free trade agreements on cross-border trade settlement in RMB under a regression analysis framework.It was found that signing a free trade agreement can promote the increase of RMB cross-border settlement share.At the same time,good political relations,similar geographical advantages,convergent exchange rate systems,and similar market characteristics of trading countries also have a significant impact on the settlement share of the RMB in cross-border trade.Finally,this article proposes the following four suggestions for consolidating and enhancing the status of the RMB as a cross-border trade settlement currency:introducing effective incentive mechanisms to enhance the momentum of trade entities using the RMB for settlement;strengthen the market role and create a favorable environment for expanding the use of RMB settlement in cross-border trade;continue to promote economic and trade globalization and economic cooperation between countries,creating opportunities for cross-border trade settlement in RMB;build a scientific support system for RMB international settlement,laying the foundation for cross-border trade RMB settlement.The innovation of this article lies in the following five aspects: firstly,this article constructs a theoretical framework from a decomposition perspective.This study explores the influencing factors and mechanisms of cross-border trade settlement in RMB from three dimensions: micro,meso,and macro.It elucidates the trajectory of factors such as trade entity selection,market environment impact,and economic cooperation policies between countries,expanding the relevant research fields of RMB internationalization analysis.Secondly,at the micro level,in a micro welfare equilibrium model of product clearance in the trade market,the decision-making factors and constraints that determine the specific settlement currency choice of traders were analyzed,and the formation process of the final currency choice decision was deduced.This article also attempts to practice the theoretical analysis framework of "Micro perspective: welfare decision-making role of settlement currency selection for trade entities".Thirdly,at the meso level,through empirical testing,it is demonstrated that market environmental factors have an impact on cross-border trade settlement in RMB.Then the study provides a practical basis for promoting RMB to become a currency for cross-border trade settlement,and it also attempted to practice the theoretical analysis framework of "meso perspective: market factors influencing settlement currency selection".Fourthly,at the macro level,through empirical analysis,we accurately identified the impact of currency swap options,the "the Belt and Road" initiative and other policies on cross-border trade RMB settlement,their action paths and differentiated impacts,providing empirical evidence for subsequent policy design and national strategy formulation.This article also attempts to practice the theoretical analysis framework of "macro perspective: the policy effects of economic cooperation between countries in settlement currency selection".Fifthly,based on empirical analysis results,this article proposes actionable suggestions to enhance the settlement share of cross-border trade in RMB and consolidate the currency position of RMB.