RMB Internationalization Research Articles

The Analysis of the Influence of "The Belt and Road Strategy" for the Internationalization of RMB

China "The Belt and Road” construction for RMB internationalization brings many development opportunities, enhance the status of RMB in the world, but also have a certain impact on the RMB internationalization. This paper analyze influence on the internationalization of RMB from two aspects of "The Belt and Road". Firstly, this paper elaborate the current status of the development of RMB internationalization from the area of cross-border RMB trade settlement, in the way of the RMB offshore market development scale and level of internationalization of RMB three, followed by The Belt and Road construction to improve the RMB regionalization and broaden the two aspects of RMB funds channel analysis "The Belt and Road" will affect the RMB international, one is "The Belt and Road construction can improve the international RMB regionalization, which lays a solid foundation for the internationalization of RMB; the two is that the output of channel construction to expand RMB to the world The Belt and Road", deepening between RMB and national circulation, thereby increasing the RMB through capital output. To speed up the pace of internationalization of RMB. At last, this paper for our country seize the "The Belt and Road" which is a good opportunity to realize the internationalization of RMB and puts forward some suggestions.

Analysis of Teaching Reform of International Finance Course in Application-Oriented Undergraduate Colleges and Universities: Taking Economics College of Changchun University as an Example

With the further internationalization of RMB and its rising international status, the Chinese government, enterprises and individuals have been involved in international business activities thoroughly and extensively, compared with the situation before entering WTO. Under the backdrop, the employers ask for more qualifications of the talents in International Finance. However, there are still problems in teaching content, teaching materials, teaching methods and practical teaching design, etc. of International Finance course in many colleges and universities, and the teaching quality fails to meet the requirements of the employers, resulting in imbalance between supply and demand. The paper tries to explore the problems in the teaching process of International Finance and proposes some suggestions for improvement in teaching content, teaching materials, teaching methods and practical teaching and examination reform, etc.

Goodbye (Chinese) Shadow Banking, Hello Market‐based Finance

ABSTRACTShadow banking in developing and emerging countries (DECs) oscillates between two semantic poles. One definition is typically deployed by scholars for the narrow analysis of non‐bank financial intermediation as a viable alternative to banking. The other, more recent, definition circulates in the policy world to capture a new agenda of engineering (securities) market‐based finance. This article argues that this second definition captures the essential but neglected aspect of shadow banking in DECs. The ‘shadow banking into market‐based finance’ narrative reaffirms the celebratory tone of the financial globalization cum liberalization thesis dominant before the global financial crisis. It seeks to depoliticize contentious debates about capital flows and the constraints that financialized globalization poses to development, instead asking DECs to encourage portfolio flows, relax the regulatory grip on shadow funding markets and tap into the growing global demand for securities that marks the new age of asset management. China illustrates this argument well. In joining the global push for market‐based finance with the ambition to further its RMB internationalization agenda, China underestimates the (Minsky‐type) fragilities involved.

Does internationalisation increase exchange rate exposure? -Evidence from Chinese financial firms

This study investigates both the symmetric and asymmetric exchange rate exposures of Chinese financial firms in the context of an accelerated pace of RMB internationalisation. We find that an increasing number of Chinese financial firms are exposed to negative symmetric effects from the change in the trade weighted effective exchange rate. The evidence concerning asymmetries shows that after 2009 negative exchange rate shocks (a weaker RMB) have a stronger effect on exposures than positive shocks (a stronger RMB). Changes in the bilateral exchange rate also have a significant impact on firm returns, given the importance of the USD in the effective exchange rate. Further, the empirical analysis reveals that exchange rate exposures are associated with firm level characteristics including total assets, earnings per share, net cash flows, investment incomes, total liabilities and firm size. Finally, we suggest that domestic and foreign stakeholders need to pay close attention to the movement of the Yuan's exchange rate before it becomes completely convertible.

Towards a floating RMB exchange rate regime

ABSTRACTThe main challenge of China’s current exchange rate regime is that with large and frequent interventions, the RMB exchange rate cannot adequately respond to the changes in economic fundamentals. This will lead to unilateral exchange rate expectations and large-scale capital inflows or outflows. In addition, large and frequent foreign exchange market interventions have a negative impact on economic structural optimisation, RMB internationalisation, and foreign investment. Two strategies can be used to introduce a floating exchange rate system: one is a free-floating exchange rate, and the other is wide range fluctuation against a basket of currencies. The latter is a transitional option before introduction of the former: a free-floating exchange rate.

The Impact of RMB International on Pricing Power of China’s Bulk Stock

With the development of our economy, China has an increasingly demand for bulk commodities and becomes a net importer of many bulk commodities. However, China has little control over bulk commodity pricing and has to passively accept the prices, which damages the interest of our country badly. Adding the RMB to the SDR is the new start of internationalization of RMB, and brings the new opportunity for controlling over bulk commodity pricing. Based on a large number of the existing literature, this paper first takes point of view in the opportunities and challenges of the join of RMB to the SDR, then analyzes the mechanism of the bulk commodity and the situation of lack of bulk commodity pricing. Finally, this paper summarizes the internationalization strategy of RMB under the background of commodity pricing power and the influence of RMB entry into SDR on the pricing power of commodities in China.

Analysis on the Belt and Road Initiative and Outward Direct Investment

The Belt and Road initiative provides mutual opportunities for China and the countries along the line. This paper analyzed the structure, influencing factors and the impact of outward direct investment from China to the countries along the Belt and road initiative. The investment is unevenly distributed and inclines to countries with abundant strategic resource, lower labor cost and better infrastructure. Various macro level factors from both host countries and China influence the scale, scope and location choice of outward direct investment. Outward direct investment from China into countries along the Belt and Road initiative would have positive impact on China’s development in various aspects, such as positive trade effect, reverse technology spillovers, industrial transformation and upgrading, and internationalization of RMB. Investment policies should be established and perfected to facilitate investment.

Management of China’s cross-border capital flows

ABSTRACTSince the turn of the century, especially since the global fiscal crisis in 2008, China’s process of capital account opening and RMB internationalization has begun to accelerate, and financial openness has improved significantly. However, due to the pressure of large-scale capital outflow over the last two years, the government has adopted a policy combination of exchange rate management, market intervention, and capital flow management. The liberalization and management of cross-border capital flow are closely linked. Based on current trends of China’s cross-border capital flows management, macro-management and micro-regulation should be distinguished in the future to construct a dual-pillar framework. In addition, cross-border capital flows management, especially capital controls, should be temporary measures. If used reasonably, they can buy some time for other reforms and adjustments.

Banks' Reputation Capital and Competitive Issue of Currencies: Evidence from Micro Data of Banks in Republican China on the Eve of Silver Outflow

Hayek put forward the theory of denationalization of money in 1976, and suggested that private banks should be allowed to issue money to restrict the issuance of governments.However, the opponents argued that the private note-issuing banks pursuing private profits would inevitably issue money unlimitedly and finally lead to inflation.This paper analyzes the effect of banks' reputation on note issuance by unifying both the issuance and credit of banks.It demonstrates that the reputation mechanism could effectively restraint note-issuing banks in competitive issuing environment, and the banks in pursuit ofsustainable long-term profits would tend to issue money in moderate rate to maintain its reputation.Furthermore, it employs the survival history of banks or the membership of Shanghai banking association to measure reputation and makes an empirical study to support the hypothesis of goodwill capital by using the micro data of 34 note-issuing banks and 150 banks during the silver outflow in 1930s.It finds that the banks with good reputation do issue money more soundly, and reputation brings the banks various advantages in business such as more paid-in capital, surplus accumulation and deposits, leading to bigger credit scale of banks with good reputation and profits at higher level; note-issuing banks do issue money more soundly actually owing to long-term profits.According to historical experience of competitive issuance of banks in Republican China, this paper provides micro evidence for the theory of denationalization of money put forward by Hayek and some implications for current monetary policy rule and RMB internationalization.

The IMF's Approval for RMB to Join the Special Drawing Rights Basket: Thinking at a Legal Level

The IMF's approval for RMB to join the Special Drawing Rights basket means that we promote more countries to choose RMB as their reserve currency and thus accelerate the process of RMB internationalization through IMF's endorsement on constant rise in China's position in global economic and financial markets, on the premise that RMB could not be fully converted in capital account. According to two currency selection criteria carried out in the fixed value framework of the Special Drawing Rights basket, the People's Bank of China takes a series of targeted measures,and forcefully enhances the freely usable feature of RMB. But how to keep the independence of monetary policies and maintain the transparency & stability of foreign exchange rates policy framework after then in China needs to depend on the perfection of domestic law and the internationalization of financial reform relying on international law.

The Impacts of Bi-directional Fluctuations of Chinese RMB on China and the World's Economies:Based on Single and Multi Countries Dynamic CGE Models

With the acceleration of RMB internationalization, the international effect of RMB exchange rate fluctuations is further strengthened. This paper builds the single national and multinational dynamic CGE models respectively, and simulates two scenarios of continued depreciation and appreciation after depreciation of RMB from 2016 to 2030 based on the latest Global Trade Analysis Project (GTAP) database and Chinese input-output table in 2012. Then it analyzes the impacts of RMB exchange rate fluctuations on China and the world's major economies from perspectives of price level, international trade, economic aggregate, industry outputs and so on. It comes to the results as follows:firstly, as for price index, RMB depreciation will bring some inflationary pressure to China;secondly, as for trade, RMB depreciation will only extend China's net export in the short term, but will depress China's net export in the long term;thirdly, as for economic aggregate, RMB depreciation will only stimulate China's whole economy in the first few years,and will lead to a deceleration of China's economic growth in the long term;fourthly, as for industrial structure, in the depreciation scenario, the output of China's agriculture and industry will ultimately decrease after expansion for several years; by contrast, the output of service sector will keep decreasing. In a word, none of these two scenarios is conducive to China's economic development in the long term. In contrast, the world's major economies like ASEAN, Japan, and the United States will benefit from RMB depreciation a lot in the long term. Therefore, Chinese government should formulate reasonable policies to strengthen expectation management, implement differentiated trade policies, improve multilateral cooperation and respond to the risks resulting from international exchange rate fluctuations actively.

RMB Internationalization and Energy Prices: Evidence for Co-integration, Causality and Interaction Relationship

Objective:Energy pricing in the international energy market is the key point for RMB internationalization, which can make the process further developed.Aim:Therefore it is of practical significance to study their co-integration relationship and causality, and though the impulse response to analyze their dynamic interaction relationship.Method:We take the Johansen co-integration and VAR model to explore the interaction between them.Results:Empirical results show that, firstly there is a long-term equilibrium between RMB internationalization and energy prices, and the change of short-term energy prices have a positive impact on the RMB internationalization index. Secondly, WTI oil price, domestic oil price and domestic coal price linearly Granger cause the RMB internationalization, but not vice versa. While RMB internationalization is only the Granger cause of the international coal price. Finally, the impulse response analysis shows that changes of energy prices play positive roles in promoting the internationalization of RMB.

The Boom and Bust of the RMB's Internationalization: A Perspective from Cross‐Border Arbitrage

The RMB's internationalization developed very quickly from 2010 to 2015H1, but it slowed down significantly since 2015H2. This paper argues that cross‐border arbitraging activities played a significant role in both the boom and the bust of the RMB's internationalization. A slower pace of the RMB's internationalization based more on real demand might become a new norm in the future. To pursue a more sustainable RMB internationalization in the next decade, the Chinese government should maintain a relatively high economic growth rate, avoid the burst of systemic financial crisis, continue to liberalize the capital account in a gradual and cautious way, accelerate the reform and opening up of the domestic financial market, and integrate the RMB's internationalization with Asian monetary cooperation.

Comment on “The Boom and Bust of the RMB's Internationalization: A Perspective from Cross‐border Arbitrage”

Comment on “The Boom and Bust of the RMB's Internationalization: A Perspective from Cross‐border Arbitrage”

The Resumption of China’s Exchange Rate Reform and the Internationalization of RMB between 2010 and 2013

The article analyzes the resumption of China’s exchange rate reform from June 2010. It finds that, while the Congress’s influence on the RMB issue generally diminished over time after the global financial crisis, international criticism and pressure from the US administration and the IMF still played an important role of agenda-setting in China’s exchange rate policy-making in 2010. The Chinese leadership stood firm to the external pressure and demonstrated solidarity and consistency towards the exchange rate policy. It argues that, with the development of RMB internationalization and increasing capital account openness, a flexible exchange rate was the feasible choice to preserve the independence and effectiveness of China’s monetary policy, which produced the Chinese leadership’s consensus on the RMB exchange rate reform in 2010. The RMB appreciated steadily and gradually against the dollar in the second round of exchange rate reform, aiming to improve confidence and promote the international use of RMB.

The Basis and Path Choice of Internationalization of RMB

The Basis and Path Choice of Internationalization of RMB

Why RMB should be more flexible

PurposeThis report examines the recent developments and trends relating to the Chinese government’s policy actions and the key issues that determine the choice of exchange rate regime in China. An up-to-date “stock-take” of the economic indicators is conducted to determine what is suitable for China in light of the rapidly evolving nature of the world economy and trading environment. This paper discusses the role of economic development, trade competitiveness, capital flow, foreign exchange reserve, and RMB internationalization in the determination of the RMB exchange rate regime.Design/methodology/approachThis research uses an inductive approach to gain a fine-grained understanding of the complex, multifaceted aspects of China’s exchange rate policy. A combination of statistical analysis, including basic descriptive statistics, trend analysis, and a correlation study are used to explore the association between various indicators and their implications. The report also draws on analysis of a broad range of data sources and the work of numerous researchers and research institutions.FindingsA more flexible exchange rate regime can play a complementary role towards rebalancing the Chinese economy by raising the buying capacity of families, rebalancing growth towards domestic consumption, and reducing reliance on export. China’s price elasticity of the demand for exports was relatively low that the appreciation of the Chinese currency has almost no influence on optimizing China’s trade balance. A more flexible two-way flow in RMB would be suitable under the current cash flow scenario in China. Reduced intervention will facilitate further adjustment in reserves. Lastly, in the early stage of RMB internationalization, flexibility in the exchange rate is one of the factors that influences its growth prospect as a reserve currency.Research limitations/implicationsThe findings and conclusion are derived based on the latest empirical information, statistical evidence, and economic theory. This inquiry does not build on a theory, and aims to neither verify a theory, nor test hypotheses. Rather, it aims to demonstrate, assess, and explain significant roles that various economic factors play in shaping the future exchange rate regime of China.Originality/valueThis paper presents the rationale behind a more flexible two-way exchange rate, by assessing the latest empirical data and theoretical explanation that support such a move.

Policy Challenges in Maintaining Renminbi Stability in China

This paper examines the policy challenges and dilemmas faced by China’s authorities in balancing exchange rate stability with the policy necessity of monetary autonomy. China will have to move toward greater exchange rate flexibility, particularly as the capital account becomes increasingly liberalized and the government pushes forward with RMB internationalization.

The Impacts of Exchange Rate and Its Fluctuation on the Internationalization of the RMB

The IMF announced on November 30, 2015 that the RMB would be adopted into the currency basket of the SDR since October 1, 2016 with a weight of 10.92%. This is a milestone of the internationalization of the RMB. This article reviewed the studies by the scholars on the internationalization of the RMB. After that the SVAR model is built upon the amount of the overseas RMB deposits, the RMB exchange rates and the rates of their fluctuations, the impulse-response analyses are applied, to study the relations among the amount of the overseas RMB deposits, the RMB exchange rates and the rates of their fluctuations. The results show that the exchange rate is not simply positively related to the internationalization of the RMB. Sometimes the relation is negative. Moreover, the amount of overseas savings of RMB has a comparatively big impact on the appreciation of the exchange rate. In the end, some suggestions on the RMB internationalization are raised on results of the above analyses.

The internationalization of the RMB: a perspective vis a vis East Asian economic and financial integration

The People’s Republic of China has achieved remarkable progress in the internationalization of the RMB by introducing a number of concrete measures to boost the RMB’s status on the world stage since 2009. The ongoing RMB internationalization is being promoted under the background of deepening economic and financial integration in East Asia. In this article, we attempt to analyse RMB internationalization from the perspective of East Asian regional integration. We hypothesize that East Asian regional integration lays a broad foundation for China to push RMB internationalization forward. An internationalized RMB, we argue, will play more important roles in the process of East Asian regionalization. Thus, RMB regionalization could be an important and necessary step of internationalization. The Chinese authorities should not only push the RMB toward internationalization under China’s framework of domestic financial system reform, but they should also integrate RMB internationalization into the process of East Asian economic and financial integration. Therefore, a win–win strategy of RMB internationalization for both China and East Asian countries is needed.