A Study On The Factors Influencing China’s Cross-Border Trade Settlement In RMB

China has now become the world’s second largest economy with strong economic strength and significant international status. However, the international status of our currency RMB doesn’t match the international status of our country. Meanwhile, the explosion of the Financial Crisis revealed the disadvantages of the current international monetary system, which caused the necessity of revolution. Under these circumstances, RMB internationalization has become inevitable. As the first step in RMB internationalization, China implemented Cross-border trade settlement in RMB in July2009. It is important and practical to know its development, to find the problems and to analyze the factors influencing its development. This paper, based on China’s reality and the theories of currency internationalization and currency choice in international trade, studies the development of and the factors influencing China’s Cross-border trade settlement in RMB, with normative and empirical analysis. Finally, the paper presents some advices to improve the further development of our Cross-border trade settlement in RMB.On the basis of some related theories, such as currency internationalization and the choice of settlement currency in trade, this paper analyzes the development, the triggers and the problems of cross-border RMB settlement systematically, which is the foundation to reveal the main factors influencing Cross-border trade settlement in RMB. The paper then analyzes the factors in theory and also in VAR model. The conclusions are as follows:(1) The main factors include the trend of our economic development, our trade development, our currency stability, offershore financial market development, our competition in world trade and so on.(2) There is a long-term equilibrium relationship among offershore financial market development(OSM), RMB appreciation(ERV), our trade development(TR) and Cross-border trade settlement in RMB(SCNY).(3) SCNY has lag response to its factors.(4) In the sample period, OSM improved SCNY, ERV improved firstly but then hindered SCNY, and TR hindered firstly but then improved SCNY. After all the analysis, this paper presents five advices.