Research On The Internationalization Of RMB And Its Countermeasures

With the economy opening and booming, the comprehensive national strengthening, the renminbi sustained appreciating and circulating in the surrounding countries and regions, the renminbi has taken on an international role within a certain range. However, as a developing country, China has appeared the distinguishing feature of "Powerful Economic, Small Currency". Either in the international trade pricing and settlement, or in the scale and asset allocation of foreign exchange reserves, China has been bounded by the current international monetary system. The weak position in the international monetary system has been more and more influencing on the sustainable development of China’s economy. Therefore, China must enhance the international status of RMB, promote the internationalization of RMB and make the RMB become an important currency in international economic and trade.The research idea of this paper is "the necessity-the evaluation of cost and benefit-countermeasure". Through relevant theories of currency internationalization theory, the paper analyses the meanings, conditions, benefits and costs of the international currency and currency internationalization, discusses the path, effects, experiences and lessons of the us dollar’s, the euro’s and the yen’s internationalization, and elaborates on the necessity and significance, the influence factors, the process and the present situation of the RMB internationalization. The paper then makes a deep research into the effects of the RMB internationalization on Chinese economy both by theoretical and empirical study, and advances the countermeasures of pressing ahead with building the RMB into an international currency, such as the reform of the RMB exchange rate regime, interest rate liberalization, the reform of the financial system, capital account convertibility, offshore and onshore financial market construction and political systems.The primary viewpoints of this paper can be summed up to three aspects.Firstly, the development of Chinese economy, the buildings of the financial system and the financial markets, the multi-polarization and the diversification of the world economy have very important roles on the development of the internationalization of the RMB. Meanwhile, we can obtain the international seigniorage revenues, reduce the foreign exchange risk and the loss of the international reserves, promote the reform of the financial system and improve the economic and political discourse from the RMB internationalization. The internationalization of RMB is necessary and urgent.Secondly, from a cost and benefit analysis on the internationalization of RMB, the research shows that the investment income of the RMB as a reserve asset has increased rapidly while the international seigniorage revenue has great fluctuation with the international economic environment. The internationalization of RMB is low. However, the non-measurable benefits of the RMB internationalization are enormous. The inflation, exchange rate and interest rate are the main factors determining the currency substitution effects. The actual is contrary to the theoretical of the currency substitution effects affected by the inflation because of the deviation from the internal and external value of the RMB. Due to the long-term expectations of the RMB appreciation, economic growth effect on the currency substitution is invalid. Therefore, we must speed up the reform of the exchange rate and the interest-rate liberalization, make the market to play the crucial role on the exchange rate and the interest rate decision. In the condition of the RMB internationalization, the monetary policy is effective to adjust the national income but invalid to stabilize prices. In addition, the costs of the RMB internationalization also include facing "Triffin dilemma", losing the independence of the economic policy, influencing the domestic financial stability, the possible monetary reversal and international responsibility, etc. In a comprehensive analysis of the impact of the RMB internationalization of Chinese economy, it shows that it is more difficult and complex to achieve the internal and external balance of the economy. However, the internationalization of the RMB is advantageous for the regulation of the economy. The internationalization of the RMB should be speeded up. Moreover, the RMB internationalization also affects the economic policy adjustment effects. Fiscal policy and monetary policy has the role in promoting economic growth. Monetary policy has more leverage of achieving price stability. Both of them are positive and effective for regulating the internal equilibrium. However, the international balance of payments could be adjusted by the exchange rate and monetary policy tools. Under acting on commonly in all of these instruments, the internal and external balance could be achieved. In the end, the paper puts forward the idea of constructing the overall risk management system and the countermeasures for all involved aspects in view of the problems and risks of the RMB internationalization. It is suggested that exchange rate marketization should be phased. The exchange rate target zone system could be putted into practice in the mid-term, but the ultimate goal is to implement a floating exchange rate system. The interest rate liberalization should be gradual and interacted with the RMB internationalization. The capital item opening should adopt progressive and its riskcontrols must be paid more attention. Based on the Hongkong RMB offshore financial market, the offshore financial market group could be gradually established. The onshore financial market is developed orderly to improve the service to foreign competition. The financial intermediary function should be converted and the financial regulation system should be improved. Meanwhile, a stable and effective political system is propitious to improve the confidence of the RMB internationalization.All in all, the RMB circulated and utilized as the international generally accepted valuation, settlement and reserve currency has become the consensus of the people. Although the RMB internationalization is in some fashion or another issue, there is still a long way to realize the RMB internationalization, it will provided a huge boost to China’s development and progress. We should grasp the opportunity, press ahead with the reform in all areas and make the RMB a more prominent currency in global finances.