A Study On Risk Control Of RMB Internationalization

For the first time, China’s total GDP surpassed Japan to become the world’s second largest economy in2010. China’s economic status in the world increased dramatically. Since August of2011, the area of cross-border trade RMB settlement has expanded from within the territory to the whole country. In addition, cross-border trade RMB settlement has extended from the current account to the capital account through carrying out a comprehensive direct overseas investment and foreign direct investment RMB settlement. The basis of RMB internationalization is becoming more and more solid. Additionally, after the international financial crisis, quantitative easing policy launched by the United States makes the credibility of the U.S. dollar in the world continue to decline, the euro zone debt crisis makes people worry about the international financial situation which is changing. Therefore, RMB has become the focus of world, and promoting RMB internationalization has become a major strategic issue to be solved. In order to accommodate the trend of RMB internationalization, the Chinese government officially announced to promote RMB internationalization at the National People’s Congress held in March of2011.RMB internationalization is a process of benefits and risks. The paper attempts to draw risks of RMB internationalization, and make corresponding recommendations about risks control. Based on the current situation and focused on the reality, the paper will summarize the risks control experience on the basis of study of the world’s major currencies internationalization process and risks control. At the same time, based on the Monetary Competition theory, the Impossible Trinity and Currency Crises theory, the paper will analyze the possible risks of RMB internationalization combing with China’s specific national conditions. The paper divides RMB internationalization risks into macro risks and micro risks. Based on a comprehensive analysis of the various risks of RMB internationalization, the paper gives principles of RMB internationalization by drawing risk control experience of US dollar, yen, and euro internationalization. The principles include principle of gradual, principle of reasonable goals and principle of through a point to an area. Finally, the paper will make recommendations about building RMB risk control macro-system and micro-system against macro risks and micro risks.