Research On The Co-movement Between Onshore And Offshore RMB Markets

As an inevitable result of financial globalization,the RMB offshore market is developing rapidly,leading to the fast growing of the linkage of RMB onshore and offshore markets.RMB is bound to become an important trading and reserve currency in the future international monetary system.This paper mainly analyzes the co-movement of onshore and offshore RMB market from three angles of theoretical,empirical and practical.What’s more,considering the wide range of research content of the interactions between RMB onshore and offshore market and the availability of data,the research focuses on the relationships of the stock markets in RMB onshore market and offshore market as well as the influence of Shanghai-Hong Kong Stock Connect for the relationship,with combination of qualitative and quantitative analysis in view of reality and policy needs.Firstly,this paper makes a comprehensive review of the relevant literature about the onshore and offshore markets.Secondly,the rise and development of the RMB offshore financial market in Hong Kong and other districts are studied.Thirdly,from the angle of the international balance of payments theory and economic base hypothesis,the spillover theory and market transmission hypothesis,as well as the theory of dual listing asset pricing,this paper sorts out the theoretical channels of the co-movement between the stock markets in RMB onshore and offshore market.Fourthly,the co-movement in the stock price between RMB onshore and offshore market in Hong Kong is analyzed empirically by using vector auto regressive(VAR)model,Granger causality test,and Copula correlation coefficient analysis.Then,after an overview for the development of Shanghai-Hong Kong Stock Connect which links the RMB onshore and offshore markets,the impact of the institution to the co-movement between the two markets is analyzed.Finally,according to the results of the theoretical and empirical analysis,some suggestions in policy to promote collaborative development of both markets are proposed,including deepening the reform of the financial system,broadening the channels of investment and perfecting the supervision of financial risk.