The RMB Internationalization: Gradually Route And Policies

Since the beginning of 21st century, the financial globalization has become a notable characteristic in the world economy. As a developing country, China should unify with the world economy for its better development. Under such a macroeconomis background, the RMB has plays an increasing import role in late years.The key point is: how step stably to international arena does RMB, realizing the regionalization and internationalization? This paper tries to examine this problem theoretically and give some advice on policy choices.In the introduction of this paper, it carries out firstly an analysis on the significance of studying RMB internationalization. It says that two new phenomena have appeared in RMB circulation fields recently. The first is : approved by State Council ,the People's Bank of China (PBC) has began to provide clearance arrangement to Hong Kong banks from January 1 2004,for their RMB business, such as personal deposits,currency conversion,banking cards and remittance. The second is: China and neighboring countries have reached a series of cross-border trade settlement treaties, which accepted RMB as the settlement currency in the cross-border trades. These phenomena mean that the payment range of RMB has already expanded to Hong Kong area from China mainland. Thus, the circulating area of RMB has stretched beyond the mainland area and RMB has stepped to great regionalization and internationalization. In the following context of the part, it demonstrates its research significances, contents, methodologies, innovative breakthroughs and unsolved problems.The rest of this paper is organized as follows:Section 1 gives a brief introduction of the developing process of the international currency system and the preconditions needed for currency internationalization. It argues that the currency internationalization should base on the strong sovereign credit.Section 2 gives a review the recent literatures of currency internationalization and the significances and the preconditions of RMB internationalization.Section 3 studies the processes and the preconditions needed for currency internationalization (such as Sterling,US dollar,Euro,Yen),from which the RMB can draw some important lessons. From the view of RMB appreciation and RMB exchange rate system,Section 4 presents a rational theoretical interpretation of RMB internationalization from the view of the RMB appreciation and RMB exchange rate systems.The following sections will be the priorities of this paper.Section 5 presents a detailed analysis of how RMB now is circulated in the Hong Kong area and cross-border trades. Section 6 concerns the feasibility of RMB regionalization. Section 7 studies the future route choices and policies choices for RMB internationalization. Based on the existed literatures and china's situations, the paper argues that RMB internationalization should choose a gradually approaching route.This paper attempts to make some innovative breakthroughs in the following aspects:1, it proposes that RMB internationalization should choose a gradually approaching route according to the China's practical conditions.2, it argues the currency internationalization should base on the strong sovereign credits. Moreover, it gives the analysis the possibility of RMB internationalization.3, according the Optimum Currency Area and the statistical experiences of China and neighboring areas, it reaches the conclusion that the lower the relevance degrees of inflation rates and the economic cycles for countries, the lower the costs of currency regionalization.