A Study On Correlation Among Onshore And Offshore Renminbi Markets

Through years of development,the offshore renminbi markets in Hong Kong have become an offshore renminbi center with the world’s largest offshore renminbi trading volume,the most comprehensive clearing measures,the most extensive financial offerings and the most powerful funding strength.With the development of renminbi foreign exchange markets,the implementation of the exchange rate market reform and the increased openness of capital projects,a well-regulated renminbi offshore market is necessary for the internationalization of the currency;therefore,studies on the relationship among the renminbi onshore and offshore markets are more and more under the spotlight.Given that a number of researches on the correlation among the markets have been carried out by both domestic and foreign scholars,further and deeper explorations are still needed as the development of the offshore financial center in Hong Kong is accelerating.Therefore,delving into this specific topic,as this thesis attempts to be,is significant both in theory and in real-world practice in terms of facilitating the connectivity and integration of the onshore and offshore renminbi markets,and promoting the marketization and internationalization of the renminbi.Setting the inauguration of the “8.11” Exchange Rate Reform Policy as the separating point,this study takes the latest updates and the trading data on the Shanghai and Hong Kong renminbi markets,and provides provides an analysis,with descriptive statistics,of the dynamics and features of the onshore renminbi spot market(CNY),the onshore renminbi forward market(DF),the offshore renminbi spot market in Hong Kong(CNH)and the offshore renminbi non-deliverable forwards market in Hong Kong(NDF).Following such an analysis,the thesis offers a positive analysis of the correlation among the above four markets: on the one hand,with help of the Granger causality test and impulse response analysis,it examines the return spillovers among the four markets and identifies the pricing center;on the other,with help of the MGARCH-BEKK model,Wald examination and Dynamic correlation coefficient,it studies the volatility spillovers among the four markets.Combining researches on both theories and real-world practice,the study reaches the following conclusion: both before and after the inauguration of the Policy,the CNY market has had a strong pricing power as a local information center;with the deepening of the marketization,however,such a pricing power has been undermined.The guiding power od the NDF market is stronger than that of the DF market,which is currently the price information center among all offshore markets.In general,after the adoption of the Policy,the CNY market,as the former information center,has been weakened,and the pricing power of the DF market still needs further strengthening.Before and after the issuance of the Policy,there have been apparent volatility spillovers among onshore and offshore markets;while after the Policy,the correlation among the markets has been enhanced as the volatility spillovers among onshore RMB markets have been enhanced;especially,the volatility spillovers of the DF market have been enhanced,which indicates that the reform has been effective.In the meantime,the CNH market has been better capable of passing on information in comparison to that before the issuance of the Policy,which indicates that the development efforts of Hong Kong as the offshore renminbi center have been efficient.In conclusion,the thesis offers advice that the reform on the renminbi exchange rate determination mechanism should be further implemented through a profound insight into the correlation among the onshore and offshore renminbi markets,so as to promote the regulated,balanced opening of the renminbi markets,the development of the offshore renminbi center in Hong Kong,and the internationalization of the currency.