Research On Commercial Banks’ Cross-border RMB Settlement Business Development

With the rapid development of Chinese economy, China’s economic strength has been further enhanced, especially after China surpassed Japan in 2010 and became the world’s second largest economy, and the importance of China’s national economic status and social status, whether international or domestic, is rising. In recent years, the RMB internationalization process was significantly accelerated. Since the pilot project was launched, the cross-border trade RMB settlement business developed rapidly, and commercial banks, as the major participants and promoters of cross-border RMB settlement business, face significant historical opportunity in expanding the international market. The first group of pilot banks, both foreign-funded banks such as HBCN, Standard Chartered, Citibank, Hang Seng Bank, and Chinese banks such as Bank of Communications and Bank of China, have played a positive role in developing cross-border trade RMB settlement business. However, the healthy development of such a new line of business is constrained by lack of experience by these banks and lagged policy responses. Therefore, the study of cross-border trade RMB settlement business is increasingly important and urgent.The paper will conduct cross-border trade RMB settlement business from the angle of commercial banks. Firstly, it makes a comparative analysis of the efforts of foreign-funded banks and Chinese banks along with developmental stages in cross-border trade RMB settlement. Followed is a SWOT analysis of China’s banking industry and Chinese- and foreign-funded banks, in hope of a full view of advantages and disadvantages as well as opportunities and challenges, so as to draw proposals for appropriate and healthy business development.This paper uses a variety of methods to conduct research, such as quantitative analysis, stylized facts, literature review, comparative analysis, by investigating the actual data from the People’s Bank of China official website and the related annual report of HBCN and Bank of China, so as to combine theory and practice. It is organized into the following four parts. The first part introduces cross-border RMB settlement business theories and concepts and theoretical foundations. The second part sorts out the research of cross-border trade settlement, providing analysis perspective of our study. The third part summarizes the features of each development stage of cross-border RMB settlement business, and analyzes the efforts of both Chinese and foreign banks to promote such a new line of business. The fourth part is a SWOT analysis of China’s banking industry’s advantages and disadvantages as well as threats and opportunities both internal and external in cross-border trade RMB settlement business. To accomplish this objective, it selects representatives of foreign banks and Chinese banks-the Bank of China and HBCN Bank (China) to compare their advantages and disadvantages in the development of this business; finally, the paper gives constructive suggestions for how to develop cross-border RMB settlement business in the future. In conclusion, it provides the appropriate suggestions on how to promote the further development of cross-border trade RMB settlement business on the basis of in-depth comparative analysis of Chinese banks and foreign-funded banks.