In China Dollarization Phenomenon Analysis

Dollarization widely exists in many countries, and is more and more important to the world economy. It is also exists in China, together with some extent of hidden dollarization, according to the special policy environment. The reason of dollarization contains economic factors and others. This paper analyzes dollarization from the pass-through effect of Chinese economy, economic openness, inflation rate, the differential of foreign and domestic interest rates and economic growth. Meanwhile, other factors, such as policy factors, moral hazard risk and system factors, are also the important inducement of dollarization in China. From the perspective of different types of dollarization, this paper finds that dollarization greatly or potentially affects every department of Chinese economy. Chinese banking system magnifies the dollarization risk. Private firms can avoid dollarization risk step by step, but at the cost of sacrifice of banking system. Government needs keep away the potential dollarization risk and debt problems. Monetary authority should attach more importance to dollarization, for it will influence the entire economy of China. So, Chinese government and monetary authority shouldn't ignore dollarization. What they can do is not only to constrain the dollarization, but also strengthen the economy's own capacity to resist risks. Finally, this paper analyzes RMB internalization form the point of dollarization, and considers that the two mentioned above naturally are currency phenomenon with same characteristics. Based on this view, China should hold the opportunity, promote Rmbization, and so promote RMB internationalization.