ASIAN TRADING SYSTEM

The Influence of RMB Internationalization on Asian Trading System

Table of Contents

Abstract3

Chapter 1: Introduction4

Background4

Objectives9

Chapter 2: Literature Review11

Usage of Renminbi (RMB) Internationally/Regionally12

Use of the Renminbi for Public Purpose13

Use of the Renminbi for Private Purpose15

Renminbi-Denominated Bonds15

Renminbi in Trade Settlement and Bank Loans17

Influence of RMB on Asian Trading System20

Availability of the Renminbi Assets under Capital Control24

Free FDI Flows27

Limited Portfolio Flows29

Controls over Banking Sector31

Objectives and Rationales for the Renminbi Internationalization32

Internationalization vs. Regionalization33

Rationales34

Implications for Monetary Policy36

Conditions for the Renminbi Internationalization45

China's Increasing Importance in the World Economy45

Full Convertibility of the Renminbi47

Renminbi Offshore Market49

Flexibility of Renminbi Exchange Rate49

Chapter 3: Methodology51

Research Design51

Potential Limitations51

Timetable52

Chapter 4: Results, Findings and Discussion54

Data Analysis62

T Test63

Regression64

Chapter 5: Conclusion66

References68

Abstract

With the rise of China, following the enhanced economic and trade connection between China and Asian economies, and China's expanding significance in the world economy, China's nationwide currency, the Renminbi (RMB) will be getting international from Asia. As local internationalization of RMB is twice bordered, in alignment to eradicate the economic dangers conveyed by this method, maximize the benefits, it is essential for China to address the trade off between costs and benefits of RMB internationalization. RMB internationalization is a dynamic method, in agreement with the distinct grade of the method, the phased scheme should be applied, and the corresponding principles should be chased too.

Chapter 1: Introduction

Background

If you take a journey in the Asian district, you will observe that the Chinese Renminbi seems more often in stores and bistros, propelled by the fast development in mainland tourist volumes. Will Chinese Renminbi be the next world currency? Since 2000, RMB internationalization has captivated large vigilance from the policymakers and the academics both at dwelling and abroad. There is sizable RMB circulation in China's neighbouring nations and economies, even RMB can be completely convertible in some evolved nations, some of neighbouring nations and economies treated RMB as a book currency. This is a new economic occurrence for both China and the world. Because in economic development annals, it has been seldom for an evolving country's currency which has captivated so much vigilance from the worldwide community. This new phenomena increased a large-scale anxiety for China, How positively can China answer to this situation? It is getting more and more significant to be cognizant of the costs and benefits of RMB internationalization method, and then put ahead the principles which agree China's nationwide interest and comprehensive strategy.

China's very fast economic development and its expanding economic integration with the world have strengthened its leverage in the world economy in the past three decades. During Asian economic urgent position of 1997-98, China was applauded as a large-scale homeland with to blame answer to region-wide currency deprecation for holding its currency stable. It was the first time that China, as well its neighbouring Asian nations, begun recognising China's appearing leverage in Asia. In a very broad variety of international economic events, China is no longer an outsider. This is not only because China retains biggest share of foreign reserves of the world, but furthermore because China's expanding economic integration with the world endows ...