Trade & Finance Development And Currency Internationalization

This paper focus on the issue of currency internationalization from the perspective of trade and finance development, then try to construct corrective theory structure. The paper analyzes the currency internationalization mechanism base on a brief historical retrospect of the main modern currencies. The results of investigation include (a) trade development is the fundmental cause of currency internationalization, (b) finance development is the necessary condition of currency internationalization, (c) the internationalization of Sterling, Dollar, Mark, Euro and Yen validated forward (a) and (b). According to the theory and demonstration, this paper analyzes RMB internationalization on the base of china economy development, a better strategy of currency internationalization was put forward from the development of china trade and finance.The main finding of this paper is that study currency internationalization from the perspective of trade and finance development, it offers a new angle of view to corrective analysis. This paper includes the further study about relation of trade development and finance development base on international political economy. On the grounding of this theory, this paper analyzes currency internationalization, international economy system and world economic power cycles. About analytical method, this paper puts in the tools of search model that is a new thing for internal researchers. This paper includes five sections.Section I , Introduction. About the main issues, concept, theory and reality groundings of the paper. It also has a literature review of currency internationalization, then generalize the main viewpoints, structures and innovations.Section II, Trade development is the fundmental cause of currency internationalization. As tools of international trade, currencies carry out the function to facilitate international transaction. And this process is also the mechanism of promoting currency internationalized. The promoting mechanism of trade development consists of two aspects. First is monetary search model about currency as exchange media of international trade. Second is the theory about invoicing currency for international trade. From these theories, we can find that trade development is the fundmental cause of currency internationalization. If one currency can be accepted as media of exchange and unit of account for much more trade flow, the primary market foundation for currency internationalization should be built, then market would select the currency to be international tool more and more. This effect of promoting currency internationalized would be obvious before the modern economy emergence, trade development is the only one cause of currency internationalization at that times. Nowadays, the effects from trade development can also be the basic factors for currency internationalization.Section III, Finance development is the necessary condition of currency internationalization. On the one hand, this section analyzes the nexus between finance development and currency internationalization from the perspective of economics, on the other hand, this section discusses the influence of finance development for currency internationalization from international political economy. Moreover, this section reviews the national economy strategy of currency internationalization by linking finance development and to trade development. We can draw the conclusion that finance development is the significant power to accelerate the process of currency internationalization especially in modern economy. In fact, with the progress of world economy, finance development has become the new higher acceleration to currency internationalization on the base of trade development.Section IV, Historical experience models of currency internationalization. This section looks back the traces of the main international currencies on the ground of trade and finance development. Although both trade development and finance development have play an important role in currency internationalization, but the mechanisms are different. Namely, Sterling internationalization depend much more on trade development; Dollar internationalization rely on both trade development and finance development; Mark & Euro internationalization base on the coordination of trade development and finance development (further on trade and finance integration); Yen internationalization neglect the role of trade development and depend more on finance arrangement singly. Importantly, the process of great economy power's currency internationalization is the same as the upgrading transformation from trade development to finance development.Section V, RMB internationalization from the view of china trade and finance development. Firstly, we make a survey of RMB internationalization. Secondly, we analyze the huge demand of finance development and RMB internationalization on the condition of china trade development. Finally, we point out the strategy of RMB internationalization from the angle of china trade and finance development. To promote RMB internationalization, china must consider the present condition that finance development has been dropped behind trade development. If china wants to construct the driving mechanism of RMB internationalization, it should make full use of the advantages from trade development firstly. Meanwhile, finance development should be follow up immediately. With the transformation coming true from trade development to finance development step by step, China RMB will rise up in the international monetary system and then become the most important international currency in the world.