Study On The Determinants Of Currency Denomination In International Bonds

Since the pilot of the RMB settlement of cross-border trade in 2009,RMB internationalization has been greatly promoted by trade driven.However,since 2015,with the slowdown in global trade growth rate,trade driver got weaken.Meanwhile,driven by factors such as the Belt and Road Initiative and RMB's participation in SDR,financial transactions promote the internationalization of the RMB has broad prospects.The issuance of international bond is an important part of international financial transactions,the issuance of RMB-denominated international bonds provides an unimpeded channel for the export of RMB to overseas and return back to home country,and is useful for the formation of a closed loop of RMB internationalization and the improvement of RMB status in international financial transactions.Therefore.This paper investigates the determinants of currencies denomination in international bond and the development of RMB-denominated international bonds.On the one hand,this paper takes panel data of multi-currency international bond as the research object,and use threshold regression model(PTR)to study the factors affecting the currency as the international bond denomination currency.On the other hand,this paper uses time series data of RMB-denominated international bonds as a sample,and uses ordinary least squares regression(OLS)to compare and analyze the differences in the factors affecting the distribution of different types of RMB international bonds.The empirical analysis yields following findings: Firstly,Strong economy and strong currency always increase the currency share of the international bond.With the relaxation of capital control,the positive impact of financial market development and capital flow is reduced,and the negative effect of exchange rate fluctuations is gradually weakened,and international bond currency structure is more sensitive to financing costs and arbitrage gains arising from exchange rate fluctuation.Secondly,economic upwards have significantly promoted the renminbi as an international bond-denominated currency and the role of trade expansion is not significant.Compared with different types of renminbi international bonds,Panda bonds are more significantly promoted by the size of China's bond market and the openness of financial markets.The issuance of dim sum bonds are more sensitive to offshore RMB fund pool scale and the financing cost measured by bond yield.The RMB's participation in SDR has limited promotion effect on the RMB as an internationalbond denomination currency,and the positive impact of the bond issuance has not yet appeared.The findings show that China should maintain rapid economic development,build a multi-level financial market,prudently promote the free flow of capital and maintain exchange rate stability,and at the same time,take advantage of the difference in onshore financing costs to strengthen the incentive to issue different types of RMB international bonds.