The Measurement Of RMB’s Overseas Demand And Its Relationship With Exchange Rate Fluctuation

With the deepening of economic globalization and the increasing status of China in the international economic and trade market,the internationalization of the RMB has progressed steadily.In 2016,the RMB was officially listed in the SDR currency basket,which is a milestone for the internationalization of the RMB.The internationalization of RMB will help China avoid the risk of exchange rate fluctuations,gain international coinage tax revenue and many other advantages,and many countries need a safe-haven currency to ease the pressure of exchange rate fluctuations in order to avoid the risk of “dollar panic”,which lays the foundation of RMB internationalization.Although the internationalization of the renminbi has achieved staged achievements,it is still difficult to replace international currencies such as the US dollar and the euro.The overseas demand of RMB directly reflects the popularity of the RMB overseas and can effectively measure the internationalization of the RMB.The article first sorts out the development history and source of funds of the offshore RMB market,and then quotes GDP,stock market value,land price level,monetization degree,macro tax rate,interest rate variable,and estimates the overseas demand of RMB from April 2009 to September 2018 by deducting the local demand method.Secondly,the article analyzes the substitution ability of RMB currency from two perspectives of internal and external factors,and finds that RMB has the potential to be used as a substitute currency for other countries.On this basis,it constructs a model of the factors affecting the external demand of RMB,and introduces the NDF exchange rate,the USD/RMB spot,the exchange rate,China’s 10-year government bond interest rate and China’s international payment market share variable,and under the premise of testing the model’s multi-collinearity,the NDF exchange rate was deleted as appropriate,and the model was rebuilt.Then,considering that the RMB cross-border payment system facilitates the cross-border payment behavior of RMB and thus affects the overseas demand of RMB,the article adds dummy variables and builds the model again.Finally,we use the error correction model to explore the relationship between RMB foreign demand and short-term exchange rate fluctuations when the data deviates from the long-term equilibrium conditions.The empirical results show that the overseas demand for RMB in the early days was relatively small.From 2012,the value began to rise rapidly,from 580.4 billion yuan to 567.916 billion yuan in 2017,an increase of nearly ten times.At the beginning of 2018,the value of RMB overseas demand dropped to 439967 which fell back to the October 2016 level,indicating that the internationalization of the RMB has encountered bottlenecks.Regarding the factors affecting the external demand of the RMB,regardless of whether or not dummy variables are introduced,the US dollar against the RMB spot exchange rate is the most important factor.After constructing the ECM model,it is found that the correction ability of the model after deviating from the long-term equilibrium is 0.097,and the value is small,indicating that the model needs a long time to adjust the deviation.To sum up,if we want to increase the overseas demand of the RMB,China should first proceed from the perspective of improving the exchange rate formation mechanism,such as adopting gradual opening of capital projects,guiding the exchange rate to the market-led floating exchange rate mechanism,and strengthening exchange rate supervision.In addition,China should continue to promote the “Belt and Road” in an in-depth manner,give full play to China’s role as a carrier,and gradually guide the use of RMB as a currency for valuation in trade with countries along the route and continue to improve the RMB cross-border payment system.All in all,the high internationalization of the renminbi is a long and tortuous process that requires great perseverance and effort.