Hong Kong's Renminbi Offshore Market Impact On Monetary Policy On The Mainland

With China’s continuously growing economic strength, the internationalizationof RMB become an irresistible general trend. Especially in recent years, as the scaleof economic intercourse between China and its neighboring countries®ions isgrowing faster and faster, the demand of RMB abroad is increasing. Theestablishment of RMB offshore market is vital to the internationalization of RMB. Itnot only help to form market-oriented interest rate and exchange rate, thus providesreferences for formulating macro-economic policies, but also help to bring RMBwhich is circulating abroad to China’s bank system. This paper analyses thedevelopment status of Hong Kong RMB offshore market from three aspects. And itgives concrete analysis on the influence of development of Hong Kong RMB offshoremarket caused to China’s monetary policy effect in an open economy from differentviewpoints of the transmission channel of interest rate, exchange rate, asset price andso on. At the same time, the paper selected RMB spot rate and NDF data in recent twoyears and used Granger causality test method to analyze the inter-influence betweenonshore market and offshore market. However, without free convertibility and withthe capital project control under current condition, the deepening development ofRMB offshore market faces many problems and brings risks or challenges to China’sfinancial market at the same time.