The Analysis Of Micro Risk Of RMB Cross-border Trade Settlement In The Process Of Capital Account Liberalization

Since China carried out the RMB cross-border trade settlement pilot in severalcities including Shanghai, Guangzhou, Shenzhen and other cities in July2009, RMBcross-border trade settlement’s scale continues to expand, and will expand the pilotto nationwide in August2011. Although the RMB cross-border trade settlement hasgain some achievements, but because some capital projects still have strong capitalcontrol, offshore RMB lack of backflow channels, RMB capital’s value can’t beincreased, thereby capital control hindered the further development of RMBcross-border trade settlement.The range of the RMB settlement of cross-border trade has been expanded tothe country, it marks a big step forward of the process of RMB internationalization.The seventh session of the Fifth Plenary Session put “gradually achieves capitalaccount convertibility” in the “12th Five-Year Development Plan”, we can see,China is steadily promoting capital account’s opening. So, Research therelationship of capital account liberalization and the RMB cross-border tradesettlement, as well as capital account liberalization’s influence on cross-border tradesettlement in RMB, it’s of great significance to further deepen the implementation ofRMB cross-border trade settlement, and to better promote the internationalization ofthe RMB.In this paper, we will starting from the microscopic point of view, studyenterprises and commercial banks’ risk when they using the RMB cross-border tradesettlement in the process of gradually opening the capital account on the basis ofprevious research, and put forward appropriate policy recommendations for theproblems. This paper consists five chapters, the content are as follows: The first chapter is an introduction to the research background and significance,and reviewed the literature, citing a major innovation and inadequacies.The second chapter discusses the relationship between capital accountliberalization and RMB cross-border trade settlement. Both Capital accountliberalization and RMB cross-border trade settlement are important process in theinternationalization, capital account liberalization will help to increase the return ofcapital mechanism, to promote the use of RMB in cross-border trade settlement.RMB cross-border trade settlement making RMB "going out” and capital AccountLiberalization makes RMB "flow back", ensuring RMB’s two-way smooth flow,further promoting the internationalization of the RMB.The third chapter analyzes the impact of capital account liberalization on RMBcross-border trade settlement. Capital account liberalization has both positive impactand negative impact on RMB cross-border trade settlement. On the one hand, capitalaccount liberalization has widened the RMB back channels to meet the enterprises’need of realized RMB investment and increasing the value, and enhance the degreeof acceptance of the RMB, thus contributing to the implementation of RMBcross-border trade settlement. On the other hand, capital account liberalization mayalso lead to the rapid inflow and outflow of short-term capital, exchange ratefluctuations caused by the capital impact will increase the risk of the enterprise usingRMB settlement, have some negative impact on RMB cross-border trade settlement.Chapter IV focuses on risks faced by enterprises and commercial banks whenthey use RMB cross-border trade settlement in the capital account opening process.Capital account liberalization will lead microscopic principal in the RMBcross-border trade settlement facing some risks, for enterprises, capital accountliberalization makes China facing the impact of international capital, the RMBexchange rate volatility to increase, making the enterprises facing the trading riskand economic risk, at the same time, enterprises’ asset and debt will arising from losswith the exchange rate fluctuations. For commercial banks, with the RMBcross-border trade settlement and capital account liberalization, foreign currency assets held by commercial banks will increase, commercial banks will face asignificant exchange rate risk, management risk and asset-debt management risk.Chapter V summarizes the full text. In the process of capital accountliberalization, we should be noted to prevent enterprises and commercial banks’microscopic risk under RMB cross-border trade settlement, to ensure capital projectsorderly, progressive, stable open. In order to prevent the risks faced by themicroscopic principal, ensure the smooth realization of the internationalization of theRMB, China should increase scientific and technological innovation, and enhancethe competitiveness of their products; improve the financial institutions’ servicemechanism and simplify RMB cross-border trade settlement business processes;gradually opening up the capital account, ensure RMB back channels; improve theRMB forming mechanism to ensure its currency stable; deepen the reform of thefinancial system, strengthen financial supervision.