The Economic Factors Influencing The Rmb Currency Substitution

Since China joined the WTO in2001, foreign economic exchanges increased year by year, with the balance of payments under the capital account convertibility gradually increase the project, the implementation of China’s willingness to exchange settlement and sales, China’s unprecedented expansion of external trade flows, and international economy is increasingly frequent in recent years coupled with the unilateral appreciation of the RMB exchange rate trends, the inevitable will happen instead of the foreign currency. As China gradually promote market-oriented interest rate and exchange rate market, further deepening the reform of financial liberalization, internationalization of the RMB is also actively promoting in foreign currency instead of local currency is the yuan an international currency substitution process of a natural phenomenon.Since the1970s, some countries in Latin America, the phenomenon about "dollarization" was so serious that caused an enormous economic influention. Since then, many Western scholars dedicated to the study of currency substitution, and made for the Western economies in the context of currency substitution model. However, as our country is in economic transition, exchange rates and interest rates have not yet market-oriented to a large extent by the subjective views of the impact of the financial authorities, therefore, can not copy the Western theory, this should be put forward for China’s foreign currency substitution model.This paper selected quarterly data in1994to2010, in the "portfolio requirements" based on the theory put forward for China’s currency substitution model, and the establishment of a VAR model, by cointegration test, Granger causality test, come to affect our foreign currency instead of the factors, and the variance decomposition based on factors, obtained foreign currency-related factors on the degree of influence of the importance of the alternative. Empirical analysis:the level of China’s national income and currency substitution negatively correlated with the anti-money alternative to a positive correlation; real effective exchange rate and currency substitution is correlated with the anti-money alternative to a negative correlation; China and the U.S. short-term negative interest rate differentials and currency substitution correlated with anti-money alternative to a positive correlation; the consumer price index growth rate and currency substitution is correlated with the anti-money alternative to a negative correlation.