A Study On Currency Cooperation Of Mainland China And HK After The Implementation Of CEPA

With the increasingly cooperation of business and trade between Mainland and Hong Kong, especially after the implement of CEPA, the uncertainty of exchange rate risks and the tremendous transaction costs are attributed to the difference in exchange rate. It is very important to the economic development of the two regions if the currency cooperation of the two regions can be implemented.According to the theory of optimum currency areas and experience of European Union, it is proposed Mainland and HK make up of common currency areas to eliminate the exchange rate risks and reduce the transaction costs. At the same time, this cooperation can strengthen China's competitive power in the world. First, the cost-revenue analysis of the cooperation tells us that the revenue of the currency cooperation is significantly lager than the cost so that both two areas have the motivation to enter the currency-cooperation areas. Then the advantages of the communication and cooperation after the implementation of CEPA will be analyzed in this paper. Of course, obstacles of the currency cooperation also exist. We find out these obstacles and try to solve these problems. Finally, this paper tries to find out the function model of the united currency and the work which we should do now to promote the currency cooperation.