An anslysis of Impact on Hong Kong Economy under free convertibility and internationalization of Renminbi currency

Abstract

Nowadays, countries around the world, including economic giant USA, are increasingly concerned over the issue of undervaluation of RMB. Also, with the trade of China diversifying to various countries around the world in recent years, China has been urged to internationalise its currency- RMB. Undoubtedly, with the pressure of various countries, internationalisation of RMB seems only the matter of time. Hong Kong has been a very close relationship with China. Therefore it is expected the change would bring a profound impact to Hong Kong. In this research, below chapters are looked into what the role should Hong Kong play for coming development of RMB. The potential benefits and dangers of internationalization of RMB would be analysed. Furthermore, explore whether it would bring golden opportunities to Hong Kong’s economy. If so, what should be the positioning of Hong Kong? These are the questions going to solve in this research. In China’s part, since internationalisation of RMB is inevitable, therefore, China needs time to minimize the risk deriving from free convertibility of RMB. To help RMB be internationalising, China needs to choose locations as a tool to further internationalise its financial systems. Clearly, since Shanghai and Hong Kong have a relatively mature financial system and regime, those places are able to help China as well as RMB to step into the global financial market.