The Determinants Of International Trade Denominated In A Currency: Rmb Yen Experience

In 2009, China has begun to propel bilateral trade settlement in RMB, firstly in Shanghai and other four coastal cities in Guangdong. But until now, the result is not significant. In the 70's, Japan was under the similar international condition as China today. Japan then began its currency internationalization strategy and propel trade invoice in Yen. This paper summarizes Japan's experience and finds that the invoicing ability of one currency mainly depends on the country's export competitiveness, currency stability, trade structure and microstructure determinants. In addition, specific measures taken by the government was also highly relevant.In this paper, through empirical analysis, we find that Japan's economic strength and the use of yen loans have significant effect to promote trade invoicing in yen in Japan's exports. Base on the Japanese experience, we find the inertia use of US dollar is hard to change. Moreover, China's trade structure still needs to upgrade. The most important, the financial infrastructure for RMB international use is not mature and the institution for RMB international settlement is not complete. However, for Japan's currency internationalization achievement is quite limited, China may not cover the cost by the benefit when using the similar policy to propel the international use of RMB.