| The off-shore financial markets have been developing for over 60 years so far. Thanks to the policy of reform and opening up and the global economic integration, the ministry of foreign trade and transnational investment of China have been advanced by leaps and bounds. These economic activity are on the basis of huge RMB capital crossing-borders flowing and foreign exchange reserves. With the constant improvement of China’s economic status and participation in international trade, the offshore demand of the RMB is getting more and more strong, and the development of the RMB offshore market is imperative. Thanks to the geographical and political advantage, Hong Kong is to become the first choice of the RMB offshore market. The banks in Hong Kong started the businesses of RMB deposit, lending, transfer and convertible since February 2004. In recent years, the new types of RMB offshore markets are rapidly rising, including Taiwan, Singapore, South Korea, London and so on. With the expansion of the geographical scopes and the further development of functions, their money creation ability is becoming more and more powerful. Because of the interest and exchange rates differentials between the offshore and the domestic markets, the RMB capital mass flows across borders once the market expectations change. This will impact the domestic money supply. Furthermore, China’s interest and exchange rates marketization and the capital account open-up have not been completed. These factors also bring challenges to the monetary policy regulation of China.In this paper,the research method of combination of theory and empirical is taken to inspect the influence of RMB offshore market to China’s money supply. This article is divided into five chapters. The first one is the introduction. It mainly contains the analysis of the economic background at home and abroad, the literature review of the existing research and the study significance, research methods, innovations and deficiencies of this article. The second chapter is the general theories of offshore markets’ influence on the currency sovereign states. They include the part of the reserve ratio system, non-bank financial intermediaries, fixed coefficient multiplier model, general equilibrium model and the money supply model under the condition of the offshore market. The third chapter discusses the development situation of the RMB offshore market, the monetary policy and the money supply of China. At the same time, the paths of the RMB cross-border circulation were inducted. Also, the author analyzed the impact of the RMB offshore market on China’s money supply from two ways: the monetary base and the money multiplier. The forth chapter is the empirical analysis. The fifth chapter summarizes the conclusions, and puts forward some suggestions, such as: construct mature RMB offshore market, take reasonable uses of the macroeconomic regulation and control policy, and actively promote the market-oriented reform of interest and exchange rates. |
