The Development Of Cross - Border RMB Settlement Business And Its Influence On RMB Internationalization

The2008financial crisis caused exchange rate volatility of international currenciessuch as the US dollar, resulting in great exchange rate risks to China’s foreign tradeenterprises. In this context, by promulgating the Measures for the Administration ofPilot RMB Settlement in Cross-border Trade on July1,2009, China officiallylaunched yuan settlement in cross-border trade business, which thereafter has gainedrapid development. In October2011, China officially launched RMB settlement forcross-border direct investment, thus the cross-border yuan business became morecomprehensive.In the context of China’s effort in accelerating the RMB cross-border business, thispaper targets to study the RMB cross-boarder business. Specifically, this dissertationhas summarized the status quo of the current RMB cross-border trade and investmentbusiness, discussed the current factors that restrict cross-border yuan trade settlementand found factors as the offshore RMB market was not mature, RMB payment andsettlement system was not perfect, the formation mechanism of RMB exchange ratesystem needed to be improved and China’s foreign trade structure was unreasonablewere included. Also, this paper studies the potential factors which may affect RMBcross-border business in the future and concludes that negative factors include thestrong return of the dollar, China’s economy in the “new normal” era and the two-wayexchange rate volatility, etc. This paper also finds China’s strong economic strengthand steady financial reform as the positive momentum.In addition, this paper carries out qualitative analysis and descriptive statisticalanalysis in terms of the influence of RMB settlement in cross-border trade on theinternationalization of RMB. Through analysis, this paper concludes that RMBsettlement in cross-border trade could promote the development of RMBinternationalization by increasing yuan’s overseas stock level. Finally, this paper putsforward several suggestions to promote the yuan’s cross-border business, includingperfecting the offshore yuan market, improving the RMB payment and settlementsystem, widening the channel of the RMB output flow, steadily pushing forwardmarketization of exchange rate and interest rate and enhancing heterogeneity ofexport commodities, etc.