Study On The Impact Of Arbitrage Activities On Hong Kong’s Offshore RMB Deposit Market

The formation of Hong Kong RMB offshore market is spontaneous.In order to support the cross-border consumption of individual residents,the Chinese government provides direct policy support to the RMB business of the Hong Kong Special Administrative Region.Since the outbreak of the international financial crisis in 2008,The current international monetary system dominated by dollars has exposed many deficiencies.Therefore,the Chinese government put forward the new strategic goal of international finance to promote the internationalization of RMB.accelerate the reform of East Asian regional monetary cooperation and promote the reform of international monetary system.At this point the development of Hong Kong RMB offshore market has become an important part of RMB internationalization.At present,Hong Kong has become the largest RMB offshore financial center in the world,providing important payment and settlement services for overseas RMB business.In this process,the price linkage of Hong Kong offshore market and domestic market results in a large number of cross-border arbitrage activities.These arbitrage activities have a series of complex effects on Hong Kong offshore RMB financial market.This paper mainly studies the impact of arbitrage activity on Hong Kong offshore RMB deposit market,which has significant theoretical and practical significance.On the basis of the theory of offshore-onshore arbitrage,this article divides China’s offshore-onshore arbitrage activities into arbitrage activities under cross-border trade settlement and arbitrage activities under no real trade background by whether it has real trade background,elaborating its arbitrage path in the theoretical part respectively.And then,According to the government’s policy effect and the development of Hong Kong offshore RMB deposit market,this paper divides Hong Kong offshore RMB deposit market into the embryonic stage,the formation stage and the comprehensive development stage.And then by analysising the changes of the offshore-onshore spread,spot exchange and forward exchange differences and the changes of Hong Kong offshore renminbi deposits,intuitively showing arbitrage factors on the impact of Hong Kong offshore RMB.In the empirical part,this paper chooses the data from the comprehensive development stage of Hong Kong offshore RMB deposit market,selects the onshore and offshore RMB deposit spreads,offshore RMB spot exchange,offshore and onshore RMB spot exchange spreads and forward exchange rates spreads as explanatory variables.The RMB deposits in Hong Kong are divided into the RMB cross-border trade remittances and the other RMB deposits.Then this paper builds long-term equilibrium model and error correction model of Hong Kong RMB remittance and the other RMB deposits respectively,to analyze the impact of arbitrage on the offshore RMB deposit market under the cross-border trade and no real trade background,then analyzing the impulse response and variance decomposition respectively.At the end of the article,according to the arbitrage status and the empirical results,this paper proposes to promote the marketization of offshore RMB interest rate,broaden the channels of offshore renminbi return,strengthen the relevant policies and suggestions on the flow of RMB and regulate the development of the foreign exchange market.