Challenges And Responses Of RMB Internationalization Process

The2008financial crisis has contributed to the reform of the internationalmonetary system, as the world’s largest emerging market country and the world’ssecond largest economy, China is actively promoting the reform of the internationalmonetary system. With the beginning of the RMB cross-border trade settlement pilotand the subsequent introduction of various policies, the internationalization of theRMB is being promoted steadily and orderly. The scope of RMB circulation outsideis increasing. RMB gradually plays a role in the settlement of cross-border trade andcross-border investment, and RMB has also become a reserve currency in somecountries, but the degree of internationalization of the RMB is still very low.This article analyzes the challenges in the process of RMB internationalizationfrom two angles: RMB as a trade pricing settlement currency, RMB as an investmentcurrency and the reserve currency. RMB as a trade pricing settlement currency facesthe following challenges: RMB cross-border trade settlement has limitations, it isdifficult to continue to expand its scale. RMB cross-border trade settlement receiptand payment imbalances lead to increased pressure on foreign exchange reservesgrowth, it is contrary to the original intention the internationalization of the RMB.Imperfect domestic financial market, in particularly, the unrealized market-orientedinterest and the undeveloped bond market constitutes a challenge of the RMB as aninvestment currency and reserve currency. The RMB products in the Hong Kong’soffshore market cannot meet the needs of the investors, the return mechanism in thebond market is not perfect, and the opening up of the capital account is not enoughetc. These problems affect the enthusiasm of the non-residents’ holdings of RMB andconstitute a challenge of the RMB as an investment currency.In order to meet these challenges, China may adjust the model of theinternationalization of the RMB in this stage, in other words, China should encourageour powerful enterprises to carry out cross-border direct investment and increase the capital output on the basis of the model “cross-border trade settlement--offshoremarket”, which can make up the defects of the RMB cross-border trade settlement,expand the use of RMB as an investment currency and can reduce pressure on foreignexchange reserves growth. Finally, this article proposes the specific recommendationson the internationalization of the RMB.