Research On The Monetary Anchor Effect Of RMB In ASEAN Region

ASEAN has an important position in the international arena.Since the establishment of the China-ASEAN Free Trade Area in 2010,ASEAN has experienced rapid growth.However,ASEAN’s success has been achieved under the U.S.dollar system,which has led to increased exchange rate risk due to the uncertainty of the Federal Reserve’s monetary policy.As a result,ASEAN has been moving away from a monetary policy closely pegged to the US dollar and towards a floating exchange rate policy pegged to a basket of currencies.In this context,the internationalization of the RMB plays a key role in strengthening monetary and financial cooperation between China and ASEAN,while China has been ASEAN’s top trading partner since the establishment of the China-ASEAN Free Trade Area,creating favorable external conditions for the RMB to become a regional currency anchor for ASEAN.Based on the above background,this paper focuses on the perspective of the RMB’s currency anchor effect in the ASEAN region,and studies whether the RMB has the strength to become a currency anchor in the ASEAN region at the theoretical level;in terms of empirical measurement,it examines whether the RMB is currently playing a currency anchor effect in the ASEAN region;combining the results of qualitative and quantitative analysis,it proposes policy recommendations to provide reference for improving the RMB’s currency anchor effect in the ASEAN region.First of all,the RMB already has the realistic conditions to become a currency anchor for ASEAN regional countries.By comparing the factors that affect the currency anchor,in terms of China’s economic strength,China’s own economic scale continues to increase,and its economic development is rapidly in the forefront of the world;In terms of the stability of the RMB currency,the low inflation rate maintains the stability of the internal currency value of the RMB,and the huge foreign exchange reserves provide a guarantee for the stability of the RMB exchange rate;At the same time,the continuous improvement of the internationalization level of the RMB has enhanced the external network of the RMB.At the external environmental level,China and ASEAN have close political,economic and trade exchanges,and ASEAN regional countries have also recognized the disadvantages of using the US dollar as the dominant currency anchor,and actively changed their monetary policies to a floating exchange rate policy anchored to a basket of currencies,which makes it possible for the RMB to become an ASEAN regional currency anchor.Finally,although the incomplete opening of China’s capital account,the imperfection of the financial system,and the long history of the US dollar as the dominant currency anchor,the formation of a strong inertia of denominated currency,and the resulting external network have all constrained the RMB to become the regional currency anchor of ASEAN,these constraints are not insurmountable difficulties.Secondly,the RMB has become the currency anchor of most ASEAN regional countries,and the currency anchor effect on some countries is large.In this paper,the external currency anchor model is extended and improved by using auxiliary regression method and adding qualifications,and the currency anchor effect of RMB in ASEAN countries is measured,and compared with the four major international currencies of US dollar,euro,yen and British pound,as well as the Korean won,which has close trade with ASEAN,so as to study whether RMB exerts a currency anchor effect in ASEAN region.Empirical results show that RMB has become the currency anchor of most ASEAN countries,and the currency anchor effect on some countries is large.Among them,the currency anchor effect is most significant in Indonesia and Malaysia.Empirical assumptions in Cambodia,Laos,and Myanmar do not support the renminbi and have become the country’s currency anchor.Due to the late start of the internationalization of the RMB,the achievements of the RMB are already very remarkable.Finally,the policy recommendations of this paper are based on realistic analysis and empirical analysis.In order to further strengthen the currency anchor effect of RMB in the ASEAN region,based on the advantages and shortcomings of China mentioned in the previous analysis,policy suggestions are put forward from the perspective of expanding advantages and making up for shortcomings: first,we should give full play to the geographical advantages of China’s southwest border bordering ASEAN countries and continue to improve trade advantages;Second,improve China’s financial system,gradually open up the capital account,improve the outflow and return channels of RMB,and increase the demand for the use of RMB in the ASEAN region.In the future,with the continuous prosperity of China’s economy and the enhancement of the external network effect of RMB,the currency anchor status of RMB in ASEAN will steadily rise.