CNY(china Yuan) Internationalization’s Impact On China’s International Trade

Most of countries’ currencies are based on US dollar, which is known as the Bretton Woods System. It is not likely to be avoid that the detriment to the world economy due to this foreign exchange system in recent years. For instance, this system played a significant role in broadening and accelerating the negative effects to the rest of the world outside the United States in 2007. Therefore, the central banks of those countries have been looking for another currencies to share the function of US dollar. China has already been one of the most influential economies around the world. In the meanwhile, CNY(China Yuan) is generally in focus in international foreign exchange market, which indicates more and more countries would like to accept CNY to replace the status of US dollar. Currency internationalization will have important impacts to both mother country’s and the world’s economic development. China started its offshore currency strategy from 2009, which now has been upgraded upon on a national level strategy. This is based on a background from two aspects. On the hand, China’s international trade has been growing stably and fast; on the other hand, China is going to sign bilateral currency swap agreements with every country on the jointly building Silk Road Economic Belt and 21st-Century Maritime Silk Road(hereinafter referred to as the Belt and Road) that was an initiative raised by Chinese President Xi Jinping. Thus, it is push on edge that CNY internationalization should be operated orderly in the next years. Due to all of above, it is nearly undoubtedly valuable to study the relationship between CNY internationalization and China’s international trade, especially for the trades with countries on the Belt and Road.This paper, firstly, focuses on current situations of CNY internationalization and the Belt and Road Strategy, which includes the qualitative analysis of their influence on China’s international trade. Then, based on the monthly database from January 2009 to February 2015, to what extent of CNY internationalization is estimated through positive analysis method, which throws light on a general tendency of CNY internationalization. The results also show that the internationalization of CNY currently remained an initial level. But the trend is going up generally. Combined with varieties such as GDPs, Forex Rates, and inflation rates, VAR model is established to analyze CNY internationalization’s effects on China’s international trade. This positive analysis indicates that CNY internationalization promoted international trade positively. Finally, the article gives suggestions to future development of CNY internationalization and international trade.