Abstract
As a united country, there are four currencies in China, including Mainland, Hong Kong, Macao and Taiwan (hereinafter referred to as “the Four Regions”). The realization on the construction of Chinese Monetary Union in the Four Regions is a crucial step to realize the strategy of the RMB internationalization, and it will make great progress in the promotion of China’s economy. The similarity in economic structure and the high dependence on trade make it feasible to construct a Chinese Monetary Union among the Four Regions, however, challenges from legal, political and economic problems still exist. The theory of optimum currency area and the experience and practice of European Currency Union will provide a proper basic theory and the best model to construct the Chinese Monetary Union. While Chinese Monetary Union cannot be realized overnight, it requires a gradual promotion by stages as well as a thorough legal supervision by providing guarantees. From the respect of strategic planning, monetary integration between Hong Kong and Macao would be the first step, then turn to realize the integration between Hong Kong, Macao and Mainland China, monetary integration within the four regions shall be realized at the last stage. In addition, from the perspective of constructing an effective economic and legal system, it is necessary to simultaneously promote the construction of unified institutions, develop the offshore RMB market, construct the RMB fund, exchange rate evaluation system and other economic systems, as well as the construction of relevant legal systems, so as to guarantee the effectively operation of the Chinese Monetary Union.
Highlights
Over the past years, domestic and foreign circumstances faced by China in its development have been complicated and challenging
Hong Kong, Macao and Taiwan rely heavily on the economy of Mainland China, which is the important prerequisite of the construction of the Chinese Monetary Union in the Four Regions
Scholars have studied on the feasibility on construction of Chinese Monetary Union through VAR model on the data before 2008, drawing a conclusion that continuous economic development of Hong Kong, Macao, Taiwan and Mainland China are prompting the formation of a strong Chinese Economic Area and making the construction of Chinese Monetary Union feasible (Zhang, Sato, & McAleer, 2008)
Summary
Domestic and foreign circumstances faced by China in its development have been complicated and challenging. China’s GDP has reached 63.6 trillion RMB, an increase of 7.4% over the previous year in 2014 (Li, 2015) and 67.7 trillion RMB with an increase of 6.9% in 2015 (Li, 2016), making China one of the fastest-growing major economies in the world. By flexibly utilizing monetary policy instruments, making targeted cuts to required reserve ratios, carrying out targeted re-lending, and making asymmetric interest rate cuts, China stepped up supports for weaker areas in economic and social development. The emergence of regional monetary union indicates the transformation from “one country, one currency” to “one market, one currency”. In this context, China, as a sovereign state, has four currencies in the Four Regions in China’s mainland and Taiwan Island, which is a huge obstacle for the economic development of Greater China.
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