Study On The Cross-Border Circulation Of RMB Under CAFTA Framework

As with China’s sustained economic growth, China’s regional trade status has improved, which cause the further expansion of the scale and scope of RMB cross-border flow. The enlarged scale of RMB promotes the internationalization of the RMB currency functions; the influence of the RMB as a regional currency has emerged.Since the China-ASEAN Free Trade Area (CAFTA) has established in2010, the economic development and cooperation between China and ASEAN countries opened a new chapter, and the Regionalization of RMB was brought into a more favorable development framework. With the CAFTA trade effect, RMB circulation in the ASEAN countries has grew rapidly, which has effectively meet the needs of the international settlement. At the same time, the cross-border circulation of RMB in today’s highly monetized society will lead to a variety of resources of cross-border configuration, leading to positive or negative effect in the National Economy and the World Economy.On one hand, under the CAFTA framework, RMB circulating overseas would promote the foreign trade between China and ASEAN countries. On the other hand, due to the absence of monitoring, RMB cross-border circulation may impact financial stability of border provinces. With the development of RMB cross-border circulation, small changes in interest rate and exchange rate are likely to cause large-scale flow of RMB; the international hot money may also take the opportunity to infiltration. This profit-driven capital flows generally have pro-cyclical characteristics, which run counter to the counter-cyclical Macroeconomic Regulation, and may increase the risk and cost of China’s Macroeconomic regulation.At present, under the CAFTA framework, we should make use of the favorable condition in China and ASEAN countries to promote the border trades, and establish an effective monitoring system of RMB cross-border circulation.