Research On Impact Of RMB Settlement Of Cross-border Trade On Shanghai International Trade

With the promotion of development strategy ‘One Belt and One Road’ and the modification of China’s free trade zone mechanism, international trading partners of China have kept on growing. However, the reputation of some international currencies which had great fluctuation such US dollar and euro is questioned. With the continuous improvement of policies and systems, People’s Bank of China and other six ministries in July 2009 formally launched cross-border trade RMB settlement business and the growth of the business scale is exponential. As the first pilot cities of Shanghai, cross-border trade RMB settlement business is developing rapidly and has gained more experience.In recent years, research on cross-border trade in RMB has been increased, but most of the existing researches are mainly normative analysis, empirical models were rare. This paper specifically discusses the influence of cross-border RMB trade settlement business on foreign trade by a case study of Shanghai. First, summarize the related currency selection theory in cross-border settlement from the prospects of the currency transaction costs and maximization of manufacturers’ profits. Illustrate the recent researches on cross-border RMB trade settlement business’ s influence on foreign trade. Second,summarize the reasons via cross-border trade RMB settlement development, specifically addressed current development in Shanghai RMB settlement business from the business scale and the number of participating enterprises and banks. Third, collect the related data from the first quarter in 2010 to third quarter in 2015, including Shanghai’s total imports,exports, imports and exports, cross-border trade RMB settlement amount in Shanghai,gross domestic product and foreign direct investment. Establish VAR models separately to measure the specific impacts on cross-border trade RMB settlement on Shanghai’s foreign trade through the Granger causality test, impulse response function analysis and variance decomposition method. The results show that there are long-term stable relationship between Shanghai’s foreign trade and cross-border trade RMB settlement business, and the cross-border RMB settlement are Granger causality reasons of Shanghai’s foreign trade.And the promotion is still relatively small, and it will be more significant. Finally,strategies and recommendation will be given from three perspectives which are nation,commercial banks and foreign trade enterprises, so as to promote the development of cross-border RMB trade settlement business scientifically and rationally.