A Study On The Impact Of China’s Outward Foreign Direct Investment On RMB Internationalization

On October 1,2016,the rights of RMB in the SDR currency basket officially took effect,which is an important symbol of the international community’s recognition of the RMB international influence.At present,there is a great deal of discussion on the impetus and path of RMB internationalization.Foreign trade is an important driving force in the process of currency internationalization.However,in recent years,with the prevalence of global trade and the industrial circuitousness policies advocated by developed countries,it has a negative impact on China’s foreign trade,showing a narrowing room for growth,and the growth pace may slow down or become normal in the future.The process of promoting RMB internationalization through foreign trade is blocked,and internationalization of RMB is in urgent need of new driving force.With the continuous improvement of China’s "going out" strategy,China’s capital output will continue to grow and continue to realize the net output of international capital.Tracing the development of the internationalization of pound and dollar,it can be found that the impetus in the process of currency internationalization is often accompanied by the transformation from foreign trade to foreign investment.At this time,it is of great significance to clarify the role of outward foreign direct investment(OFDI)in the internationalization of RMB for their future development,and it is also helpful for the Chinese government to make a correct macro decision on the current situation.Under the background of the continuous development of OFDI and the weakness of foreign trade,this paper proposes that OFDI may become a new entry point to promote the internationalization of RMB.In the theoretical analysis,this paper mainly analyzes the development of the internationalization of RMB functions promoted by OFDI,and then influences the process of RMB internationalization.In addition,based on the monthly data from2011 to 2018,this paper established an econometric model for empirical analysis.The results showed that China’s foreign direct investment can promote the internationalization of RMB.Besides,OFDI has a significant positive effect on cross-border RMB trade capacity,cross-border RMB reserve and non-trade and non-reserve.OFDI has the greatest impact on non-trade and non-reserve sectors,followed by cross-border RMB trade capacity,and less impact on cross-border RMB reserve.In addition,cross-border RMB trade settlement,offshore RMB deposits and non-trade and non-reserve sectors all have a significant positive effect on RMBinternationalization.With the background of rising global trade protectionism,China’s OFDI still has great room to promote the internationalization of RMB and it is a new driving force for the internationalization of RMB.Therefore,the role of OFDI should be emphasized in the process of RMB internationalization,so as to realize the coordinated development of RMB internationalization and OFDI.