The Analysis Of The RMB Internationalization’s Costs And Benefits

Since the outbreak of the financial crisis in2008, China’s economy has beenaffected to a certain degree. The depreciation of the dollar caused that foreign exchangereserves of China have shrunk dramatically because60%of China’s foreign exchangereserves are U.S. dollars. Meanwhile, China has also taken some positive measures tocope with the crisis, and set up the pilot of the RMB trade settlement, and actively carriedout monetary exchange cooperation with the countries all over the world in order toenhance their confidence in China. It can be said that the financial crisis also provides thechance for the internationalization of the RMB. In this context, the internationalization ofthe RMB is very necessary, and China also already has some of required conditions for it.In order to make a comparison between the costs and benefits of the RMBinternationalization, this thesis focuses on the issue of RMB internationalization’s costsand benefits.The first one is to study the relevant literatures both at home and abroad. This partof the study mainly includes the definition， costs and benefits of currencyinternationalization, as well as the pros and cons of the RMB internationalization etc.Then it carries on the present situation of the RMB internationalization on the qualitativeand quantitative analysis. After that, this paper carries on costs and benefits of the RMBinternationalization by taking them into two themes. Firstly, the RMBinternationalization costs mainly include: to trap in a "trilemma", to face the "Triffindilemma", the RMB internationalization reversal risk, currency substitution risk and thedomestically threatened financial and economic stability. Secondly, the revenue of theRMB internationalization is divided into two parts, both quantifiable andnon-quantifiable. The former mainly includes international seigniorage revenue andfinancial net income acquired from the oversea RMB reserve asset investment.According to the calculation in the paper, we actually gained83.734billion Yuan ofinternational seigniorage income. In accordance with the growth rate of importsmaintaining the same ratio, it can be calculated that the actual income for the RMBinternationalization will be up to1.30344trillion yuan, a considerable income till2020. The latter mainly includes: to enhance the international status, to gain foreign exchangereserves income, to improve the international monetary system, and to promote thedevelopment of the financial markets, international trade and foreign investment. At last,from the overall, according to the comparison between the costs and benefits of the RMBinternationalization, this paper thinks that the benefits are greater than the costs of theRMB internationalization. Meanwhile, this paper gives some suggestions on promotingthe RMB internationalization.